<PAGE>
As filed with the Securities and Exchange Commission on October 27, 1999
Registration Statement No. 333-86089
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
----------------
PLUG POWER INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 3629 22-3672377
(Primary Standard Industrial (I.R.S. Employer
(State or Other Classification Code Number) Identification No.)
Jurisdiction
of Incorporation or
Organization)
----------------
968 Albany-Shaker Road
Latham, NY 12110
(518) 782-7700
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive office)
----------------
Gary Mittleman
President and Chief Executive Officer
Plug Power Inc.
968 Albany-Shaker Road
Latham, NY 12110
(518) 782-7700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
Copies to:
Stuart M. Cable, P.C. David C. Chapin, Esq.
Robert P. Whalen, Jr., P.C. Ropes & Gray
Goodwin, Procter & Hoar llp One International Place
Exchange Place Boston, Massachusetts 02110
Boston, Massachusetts 02109-2881 (617) 951-7000
(617) 570-1000
----------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the SEC, acting pursuant to Section
8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. These securities may not be sold until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+preliminary prospectus is not an offer to sell nor does it seek an offer to +
+buy these securities in any jurisdiction where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion. Dated October 27, 1999.
6,000,000 Shares
[Plug Power logo appears here]
Common Stock
-----------
This is an initial public offering of shares of Plug Power Inc. All of the
shares of common stock are being sold by Plug Power.
Before this offering, there has been no public market for the common stock.
It is currently estimated that the initial public offering price per share will
be between $13.00 and $15.00. Application has been made for quotation of the
common stock on the Nasdaq National Market under the symbol "PLUG".
See "Risk Factors" on page 8 to read about factors you should consider before
buying shares of the common stock.
-----------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
-----------
<TABLE>
<CAPTION>
Per Share Total
--------- -------
<S> <C> <C>
Initial public offering price................................. $ $
Underwriting discount......................................... $ $
Proceeds, before expenses, to Plug Power...................... $ $
</TABLE>
To the extent that the underwriters sell more than 6,000,000 shares of common
stock, the underwriters have the option to purchase up to an additional 900,000
shares from Plug Power at the initial public offering price less the
underwriting discount.
-----------
The underwriters expect to deliver the shares against payment in New York,
New York on , 1999.
Goldman, Sachs & Co.
Hambrecht & Quist
Merrill Lynch & Co.
FAC/Equities
-----------
Prospectus dated , 1999.
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information and Plug Power's financial statements, the notes to those financial
statements and the other financial information appearing elsewhere in this
prospectus. In addition to historical information, the following summary and
other parts of this prospectus contain forward-looking statements that reflect
our plans, estimates, intentions, expectations and beliefs. Our actual results
could differ materially from those discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those set forth in the "Risk Factors" section and contained
elsewhere in this prospectus.
Plug Power Inc.
Our Business
We are a leading designer and developer of on-site, electricity generation
systems utilizing proton exchange membrane (PEM) fuel cells for residential
applications. We believe that the electricity our residential fuel cell systems
will provide to homes can be less expensive, more reliable, more efficiently
produced and environmentally cleaner than the electricity provided by the
existing electric utility grid and other power generation technologies. We plan
to bring our first residential fuel cell systems to market in 2001 and to
become the first mass market producer of residential fuel cell systems by
selling 100,000 systems per year by 2003.
Our Product
Our residential fuel cell system will be an appliance, initially about the
size of a refrigerator, that will produce electricity through a clean,
efficient process without combustion. Our system will receive fuel from a
home's existing natural gas line or propane tank, convert the fuel into a
hydrogen-rich stream, and then combine it with oxygen from the air in a
chemical reaction that produces electric power. Our initial residential systems
will be designed to supply 7 kilowatts (kW) of baseload power, 10 kW of peak
power and 15 kW of surge load capacity, which will provide the full electricity
needs of a home, although the home can remain connected to the electric grid
for back-up purposes. To date, we have conducted successful demonstrations of
hydrogen-, methanol-, and natural gas-fueled systems and expect to demonstrate
a propane-fueled system during 2000.
Our Alliance with General Electric Company
General Electric Company has selected Plug Power to be its exclusive supplier
of fuel cell systems for residential and commercial applications under 35 kW.
Together with GE On-Site Power, Inc., a subsidiary of General Electric that
operates within General Electric's GE Power Systems business, we formed GE Fuel
Cell Systems, LLC, a joint venture dedicated to marketing, selling, installing
and servicing Plug Power fuel cell systems. GE Fuel Cell Systems is the
exclusive, global distributor and servicer of our systems (except in four
states assigned to another distributor) and all systems that it sells will be
co-branded with both the General Electric and Plug Power names and trademarks.
We believe that our strength in fuel cell system design and development,
coupled with General Electric's brand name, worldwide sales and distribution
network, service capabilities, and commitment to the commercialization of our
fuel cell technology, will allow us to bring the first and best residential
fuel cell system to market and, by doing so, establish the industry standard
for this new product.
3
<PAGE>
Changes in the Power Industry
Industrialized societies are dependent upon reliable, on-demand electric
power to function. Demand for electricity is expected to continue to grow as
the economies of the United States and other industrialized nations expand,
particularly with the increased reliance on computers and other electronics. At
the same time, developing nations will need additional electricity to improve
their standards of living.
Reliance upon the existing infrastructure has been and continues to be
problematic due to capacity constraints, environmental concerns and other
issues. In addition, utility deregulation is creating new challenges and
opportunities in the electric power industry. This evolving competitive
industry environment coupled with the consumer demand for more reliable,
accessible and competitively priced sources of electric power, is driving
traditional energy providers to develop new strategies and seek new
technologies for electricity generation, transmission, and distribution.
Our Solution
We believe our residential fuel cell systems will offer the following
benefits to energy providers and consumers:
. Electric utilities and rural electric cooperatives will be able to lower
capital expenditures by deploying our systems to meet increasing demand
for electricity rather than expanding, repairing or replacing existing
generation, transmission and distribution infrastructure.
. Natural gas and propane distributors will be able to increase the
utilization of their existing distribution infrastructure, and mitigate
the seasonality of their businesses, by taking advantage of additional
demand for the fuels used by our systems.
. Energy providers will be able to satisfy stricter environmental
regulations by using our fuel cell systems, which will generate
electricity through an efficient chemical process that produces fewer
harmful by-products than conventional combustion-based technologies.
. Consumers will be able to lower their exposure to weather- and capacity-
driven outages by utilizing our on-site systems to provide their
residential electricity, and may also benefit from lower electricity
costs.
Our Strategy
Our business strategy focuses on combining existing fuel cell technology with
improvements in system integration, component design, and manufacturing
processes to achieve the low-cost manufacturing capability necessary to bring
our product to the mass market. The key components of this strategy are:
. Focus on residential applications. We intend to focus on commercializing
our fuel cell systems for the residential mass market, which we believe
is the most accessible market for early fuel cell applications.
. Develop low-cost manufacturing capability and processes. We seek to
develop high-volume manufacturing capability by working closely with a
network of carefully selected suppliers to develop and produce low-cost
components and subsystems, while focusing internally on improving system
design and integration.
. Utilize General Electric's product development expertise and purchasing
capabilities. We believe we can utilize General Electric's engineering,
testing and analytical resources, as well as its purchasing power, to
help us develop a superior product more rapidly and at lower cost.
4
<PAGE>
. Leverage our strategic alliance with General Electric to achieve market
leadership. We believe we can leverage General Electric's brand name and
worldwide marketing, distribution and servicing capability to gain
immediate recognition for our product and achieve market leadership.
. Acquire or license complementary technologies. We regularly review
strategic opportunities to acquire or license technologies that can
advance the development of low-cost system components and subsystems.
. Capitalize on our experience in the residential market to develop other
fuel cell applications, including automotive applications. We believe
that we can build on the experience and knowledge we will gain through
the development of our residential fuel cell systems to develop other
commercial applications of fuel cell technology, including automotive
applications. We have a team of engineers dedicated to developing fuel
cell power systems for automotive applications, but do not anticipate
commercial production until at least 2006.
Additional Equity Financing at Time of Offering
Immediately before this offering and in addition to the shares of common
stock to be sold in this offering, the following current stockholders of Plug
Power will purchase additional shares of common stock as follows:
. Our founding stockholders, Mechanical Technology Incorporated and Edison
Development Corporation (a wholly owned subsidiary of DTE Energy
Company), will purchase an aggregate of 5,466,666 shares of common stock
for a total purchase price of $41.0 million,
. GE On-Site Power, Inc. will purchase 3,000,000 shares of common stock
for $37.5 million and
. Two additional stockholders will purchase an aggregate of 750,000 shares
of common stock for a total purchase price of $6.4 million.
5
<PAGE>
The Offering
<TABLE>
<C> <S>
Shares offered by Plug Power........................ 6,000,000 shares
Common stock to be outstanding after this offering.. 42,208,480 shares(1)
Estimated net proceeds to Plug Power................ $77,300,000
Use of Proceeds..................................... For general corporate
purposes, including
research and product
development,
manufacturing and market
development, capital
expenditures and
potential acquisitions.
See "Use of Proceeds".
Proposed Nasdaq National Market symbol.............. "PLUG"
</TABLE>
- --------
(1) The number of shares of our common stock that will be outstanding after
this offering includes 26,991,814 shares outstanding as of September 30,
1999, plus 9,216,666 shares of common stock to be issued upon the exercise
of outstanding warrants and other purchase rights immediately before this
offering as described above under "--Additional Equity Financing at Time of
Offering", plus 6,000,000 shares of common stock to be issued in this
offering. This number excludes up to 900,000 shares of common stock
issuable upon exercise of the overallotment option granted to the
underwriters and up to 7,922,191 shares of common stock reserved for
issuance under our stock option and employee stock purchase plans.
----------------
We were formed as a Delaware limited liability company on June 27, 1997 and
will be merged into a newly-formed Delaware corporation immediately before this
offering. Unless otherwise indicated, all information that we present in this
prospectus for any date or period gives effect to the merger as if it had
occurred on that date or as of the beginning of that period and all references
to capital stock for periods before the merger mean our issued and outstanding
membership interests. Our principal executive offices are located at 968
Albany-Shaker Road, Latham, New York 12110. Our telephone number at that
location is (518) 782-7700 and our Internet address is www.plugpower.com. The
information contained on our website is not incorporated by reference in this
prospectus.
The name Plug Power and our logo are names and trademarks that belong to us.
This prospectus also contains the names of other entities which are the
property of their respective owners.
6
<PAGE>
Summary Financial Data
The tables below present our statement of operations data for the period from
June 27, 1997 (date of inception) to December 31, 1997, the year ended December
31, 1998, and the six month periods ended June 30, 1998 and 1999, and our
balance sheet data at June 30, 1999. The balance sheet information is
presented:
. on an actual basis;
. on a pro forma basis giving effect to the issuance of 533,334 shares of
common stock for $4.0 million pursuant to a September 1999 capital call,
the issuance of 9,216,666 shares of common stock to be issued for $84.9
million upon the exercise of outstanding warrants and other purchase
rights immediately before this offering, and the acquisition of real
estate from Mechanical Technology in July 1999 for $10.9 million (which
includes our assumption of $6.2 million of debt), all as described in
"Management's Discussion and Analysis of Financial Condition and Results
of Operations".
. on a pro forma, as adjusted basis to reflect the pro forma adjustments
described above and the sale of 6,000,000 shares of common stock in this
offering at an assumed initial public offering price of $14.00 per
share, after deducting the estimated underwriting discounts and
commissions and our estimated offering expenses.
<TABLE>
<CAPTION>
Six months ended June 30,
-----------------------------
Period from
June 27,
1997 to Year ended
December 31, December 31,
1997 1998 1998 1999
------------ ------------ ------------ -------------
(Unaudited) (Unaudited)
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Statement of Operations
Data:
Contract revenue........ $ 1,194 $ 6,541 $ 2,549 $ 3,696
Cost of contract
revenue................ 1,227 8,864 3,439 5,118
------- ------- ------------ -------------
Loss on contracts....... (33) (2,323) (890) (1,422)
In-process research and
development............ 4,042 -- -- --
Research and development
expense................ 1,301 4,632 2,154 7,780
General and
administrative
expense................ 630 2,754 1,328 6,069
------- ------- ------------ -------------
Operating loss......... (6,006) (9,709) (4,372) (15,271)
Other income,
principally interest... 103 93 42 218
------- ------- ------------ -------------
Loss before equity in
losses of affiliate... (5,903) (9,616) (4,330) (15,053)
Equity in losses of
affiliate.............. -- -- -- (32)
------- ------- ------------ -------------
Net loss............... $(5,903) $(9,616) $ (4,330) $ (15,085)
======= ======= ============ =============
Basic and diluted net
loss per share......... $ (0.62) $ (0.71) $ (0.40) $ (0.71)
======= ======= ============ =============
Shares used in computing
basic and diluted net
loss per share......... 9,500 13,617 10,865 21,299
======= ======= ============ =============
</TABLE>
<TABLE>
<CAPTION>
June 30, 1999
----------------------------------
Pro Forma,
Actual Pro Forma As Adjusted
------- -------------- -----------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.................... $17,243 $106,118 $183,418
Working capital.............................. 13,570 102,165 179,465
Total assets................................. 37,233 186,966 214,266
Long-term obligations........................ 155 6,035 6,035
Total stockholders' equity................... 32,306 125,879 203,179
</TABLE>
7
<PAGE>
RISK FACTORS
You should carefully consider the following risks and all other information
contained in this prospectus before purchasing our common stock. If any of the
following risks occur, our business, prospects, results of operations or
financial condition could be harmed. In that case, the trading price of our
common stock could decline, and you could lose all or part of your investment.
This prospectus also contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those
anticipated in the forward-looking statements as a result of specific factors,
including the risks described below and elsewhere in this prospectus.
We have only been in business for a short time and your basis for evaluating us
is limited
We were formed in June 1997 to further the research and development of
residential fuel cell systems. We do not expect to have a commercially viable
product until at least 2001. Accordingly, there is only a limited basis upon
which you can evaluate our business and prospects. An investor in our common
stock should consider the challenges, expenses and difficulties that we will
face as a development stage company seeking to develop and manufacture a new
product.
We have incurred losses and anticipate continued losses through at least 2003
As of June 30, 1999, we had an accumulated deficit of $30.6 million. We have
not achieved profitability and expect to continue to incur net losses until we
can produce sufficient revenues to cover our costs. We expect the cost to
produce our pre-commercial systems during 1999 and 2000 to be higher than their
sales price under the terms of our distribution arrangements with GE Fuel Cell
Systems and Edison Development. Futhermore, even if we achieve our objective of
bringing our first commercial product to market in 2001, we anticipate that we
will continue to incur losses until we can cost-effectively produce and sell
our residential fuel cell systems to the mass market, which we do not expect to
occur until after 2002. Even if we do achieve profitability, we may be unable
to sustain or increase our profitability in the future. See "Selected
Historical Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
We may never complete the research and development of a commercially viable
residential fuel cell system
We do not know when or whether we will successfully complete research and
development of a commercially viable residential fuel cell system. We have
produced and are currently demonstrating a number of test and evaluation
systems and are continuing our efforts to decrease the costs of our systems'
components and subsystems, improve their overall reliability and efficiency,
and ensure their safety. However, we must complete substantial additional
research and development on our systems before we will have a commercially
viable product. In addition, while we are conducting tests to predict the
overall life of our systems, we will not have run our systems over their
projected useful life prior to commercialization. See "Business--Product
Development and Commercialization Process".
A mass market for residential fuel cell systems may never develop or may take
longer to develop than we anticipate
Fuel cell systems for residential use represent an emerging market, and we do
not know whether our targeted distributors and resellers will want to purchase
them or whether end-users will want to use them. If a mass market fails to
develop or develops more slowly than we anticipate, we may be unable to recover
the losses we will have incurred to develop our product and may be unable to
achieve profitability. The development of a mass market for our systems may be
impacted by many factors which are out of our control, including:
. the cost competitiveness of fuel cell systems;
8
<PAGE>
. the future costs of natural gas, propane and other fuels used by our
systems;
. consumer reluctance to try a new product;
. consumer perceptions of our systems' safety;
. regulatory requirements; and
. the emergence of newer, more competitive technologies and products.
We have no experience manufacturing residential fuel cell systems on a
commercial basis
To date, we have focused primarily on research and development and have no
experience manufacturing fuel cell systems for the residential market on a
commercial basis. We are currently constructing a 51,000 square foot
manufacturing facility and are continuing to develop our manufacturing
capability and processes. We do not know whether or when we will be able to
develop efficient, low-cost manufacturing capability and processes that will
enable us to meet the quality, price, engineering, design and production
standards or production volumes required to successfully mass market our
residential fuel cell systems. Even if we are successful in developing our
manufacturing capability and processes, we do not know whether we will do so in
time to meet our product commercialization schedule or to satisfy the
requirements of our distributors or customers. See "Business--Manufacturing".
We are heavily dependent on our relationship with GE Fuel Cell Systems and
General Electric's commitment to develop the residential fuel cell market
Substantially all of our revenue for the foreseeable future will be derived
from sales of our products to GE Fuel Cell Systems. We have granted to GE Fuel
Cell Systems exclusive worldwide rights to market, distribute, install and
service Plug Power fuel cell systems designed for residential and commercial
applications under 35 kW (other than the states of Illinois, Indiana, Michigan
and Ohio, in which Edison Development has exclusive distribution rights). Under
our distribution agreement, we will sell our systems directly to GE Fuel Cell
Systems, which, in turn, will seek to sell them to selected resellers. We are
also obligated under an amendment to our agreement to purchase $12.0 million of
technical support services from General Electric during the next three years.
Our distribution agreement expires in 2009, although General Electric may
terminate the agreement earlier if, among other reasons, we fail to do any of
the following:
. remain in material compliance with the development schedule toward a
January 1, 2001 product release;
. produce competitive commercial fuel cell systems;
. meet commercial production and cost requirements;
. produce systems that comply with regulatory requirements; or
. obtain all necessary approvals and certifications for our systems.
Our ability to sell our systems to the mass market is heavily dependent upon
General Electric's worldwide sales and distribution network and service
capabilities. Even though we own a minority interest in GE Fuel Cell Systems,
we cannot control its operations or business decisions. Any change in our
relationship with General Electric, whether as a result of market, economic, or
competitive pressures, including any decision by General Electric to alter its
commitment to our fuel cell technology in favor of other fuel cell
technologies, to develop fuel cell systems targeted at different markets than
ours or to focus on different energy product solutions could harm our potential
earnings by depriving us of the benefits of General Electric's worldwide sales
and distribution network and service capabilities. See "Business--Our Strategy"
and "Business--Distribution and Marketing".
9
<PAGE>
We may not meet our product development and commercialization milestones
We have established internal product development and commercialization
milestones and dates for achieving development goals related to technology and
design improvements. We use these internal milestones to assess our progress
toward developing a commercially viable residential fuel cell system. For
example, we established a milestone date of June 1998 for powering a home with
a hydrogen-fueled residential fuel cell system and established a milestone date
of October 1998 for demonstrating a methanol-fueled system and a natural gas-
fueled system. While we successfully powered a three-bedroom home in June 1998
using a hydrogen-fueled system, our demonstration of the methanol-fueled system
did not occur until November 1998 and our demonstration of the natural gas-
fueled system did not occur until December 1998, in each case due to our
increased focus during that period on growing our work force and expanding our
physical plant and scope of operations. Neither of these delays, nor any other
missed milestone, has had any material impact on our commercialization schedule
to date. While we have been aggressive in setting our internal milestones and
have been generally successful in meeting them, if we do experience delays in
meeting our development goals or if our systems exhibit technical defects or
are unable to meet cost or performance goals, including power output, useful
life and reliability, our commercialization schedule could be delayed beyond
2001. In such event, potential purchasers of our initial commercial systems may
choose alternative technologies and any delays could allow potential
competitors to gain market advantages. We cannot guarantee that we will
successfully achieve our milestones in the future. See "Business--Product
Development and Commercialization Process".
We are dependent on third party suppliers for the development and supply of key
components for our products
While we have recently entered into relationships with suppliers of our key
components, we do not know when or whether we will secure relationships with
suppliers of all required components and subsystems for our fuel cell systems,
or whether such relationships will be on terms that will allow us to achieve
our objectives. Our business, prospects, results of operations, or financial
condition could be harmed if we fail to secure relationships with entities who
will supply the required components for our systems.
Once we establish relationships with third party suppliers, we will rely on
them to provide components for our fuel cell systems. A supplier's failure to
develop and supply components in a timely manner, or to supply components that
meet our quality, quantity or cost requirements, or our inability to obtain
substitute sources of these components on a timely basis or on terms acceptable
to us, could harm our ability to manufacture our fuel cell systems. In
addition, to the extent the processes that our suppliers use to manufacture
components are proprietary, we may be unable to obtain comparable components
from alternative suppliers.
We face intense competition and may be unable to compete successfully
The markets for electricity are intensely competitive. There are many
companies engaged in all areas of traditional and alternative electric power
generation in the United States, Canada and abroad, including, among others,
major electric, oil, chemical, natural gas, and specialized electronics firms,
as well as universities, research institutions and foreign government-sponsored
companies. These firms are engaged in forms of power generation such as solar
and wind power, reciprocating diesel engines and microturbines as well as grid-
supplied electricity. Many of these entities have substantially greater
financial, research and development, manufacturing and marketing resources than
we do.
There are a number of companies located in the United States, Canada, and
abroad that are developing PEM fuel cell technology. We also compete with
companies that are developing applications, residential and otherwise, using
other types of fuel cells. Some of our competitors are
10
<PAGE>
much larger than we are. If these larger competitors decide to focus on the
development of residential fuel cell systems, they have the manufacturing,
marketing, and sales capabilities to complete research, development and
commercialization of a commercially viable residential fuel cell system more
quickly and effectively than we can. See "Business--Competition".
Changes in government regulations and electric utility industry restructuring
may affect demand for our fuel cell systems
The market for electricity generation products is heavily influenced by
federal and state governmental regulations and policies concerning the electric
utility industry. The loosening of current regulatory standards could deter
further investment in the research and development of alternative energy
sources, including fuel cells, and could result in a significant reduction in
the potential market demand for our products. We cannot predict how the
deregulation and restructuring of the industry will affect the market for
residential fuel cell systems. See "Business--Changes in the Power Industry".
Our business may become subject to future government regulation which may
impact our ability to market our product
We do not believe that our product will be subject to existing federal and
state regulations governing traditional electric utilities and other regulated
entities. We do believe that our product and its installation will be subject
to oversight and regulation at the local level in accordance with state and
local ordinances relating to building codes, safety, pipeline connections and
related matters. Such regulation may depend, in part, upon whether a fuel cell
system is placed outside or inside a home. At this time, we do not know which
jurisdictions, if any, will impose regulations upon our product. We also do not
know the extent to which any existing or new regulations may impact our ability
to distribute, install and service our product. Once our product reaches the
commercialization stage and we begin distributing our systems to our target
early markets, federal, state or local government entities or competitors may
seek to impose regulations. Any new government regulation of our product,
whether at the federal, state or local level, including any regulations
relating to installation and servicing of our products, may increase our costs
and the price of our systems, and may have a negative impact on our revenue and
profitability, and therefore, harm our business, prospects, results of
operations, or financial condition.
Utility companies could place barriers on our entry into the marketplace
Utility companies commonly charge fees to industrial customers for
disconnecting from the grid, for using less electricity, or for having the
capacity to use power from the grid for back up purposes. Though these fees are
not currently charged to residential users, it is possible that utility
companies could in the future charge similar fees to residential customers. The
imposition of such fees could increase the cost to residential customers of
using our systems and could make our systems less desirable, thereby harming
our revenue and profitability.
Alternatives to our technology could render our systems obsolete prior to
commercialization
Our system is one of a number of alternative energy products being developed
today as supplements to the electric grid that have potential residential
applications, including microturbines, solar power and wind power, and other
types of fuel cell technologies. Improvements are also being made to the
existing electric transmission system. Technological advances in alternative
energy products, improvements in the electric grid or other fuel cell
technologies may render our systems obsolete.
11
<PAGE>
The hydrocarbon fuels on which our systems rely may not be readily available or
available on a cost-effective basis
Our systems' ability to produce electricity depends on the availability of
natural gas and propane. If these fuels are not readily available to the mass
market or if their prices are such that electricity produced by our systems
costs more than electricity provided through the grid, our systems would be
less attractive to potential users.
Our residential fuel cell systems use flammable fuels which are inherently
dangerous substances
Our residential fuel cell systems will utilize natural gas or propane in a
catalytic reaction which produces less heat than a typical gas furnace. While
our fuel cell system does not use these fuels in a combustion process, natural
gas and propane are flammable fuels that could leak in a home and combust if
ignited by another source. These dangers are present in any home appliance that
uses natural gas or propane such as a gas furnace, stove or dryer. Since our
fuel cell systems are a new product, any accidents involving our systems or
other fuel cell-based products could impede demand for our products.
We may be unable to raise additional capital to complete our product
development and commercialization plans
Our product development and commercialization schedule could be delayed if we
are unable to fund our research and development activities or the development
of our manufacturing capabilities. We expect that the net proceeds of this
offering, together with the proceeds from our issuance of shares to current
stockholders in September 1999 and immediately before the closing of this
offering and all other existing sources of capital, will be sufficient to fund
our activities through the end of 2001. We believe it is likely we will need to
raise additional funds to achieve full commercialization of our product. We do
not know whether we will be able to secure additional funding, or funding on
terms acceptable to us, to pursue our commercialization plans through the mass
market stage. See "Use of Proceeds" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations".
We may have difficulty managing the expansion of our operations
We are undergoing rapid growth in the number of our employees, the size of
our physical plant and the scope of our operations. For example, we began with
22 employees in June 1997 and expect to have approximately 300 by the end of
1999. Such rapid expansion is likely to place a significant strain on our
senior management team and other resources. Our business, prospects, results of
operations or financial condition could be harmed if we encounter difficulties
in effectively managing the budgeting, forecasting and other process control
issues presented by such a rapid expansion.
We face risks associated with our plans to market, distribute and service our
products internationally
We intend to market, distribute, and service our residential fuel cell
systems internationally through GE Fuel Cell Systems. We have limited
experience developing, and no experience manufacturing, our products to comply
with the commercial and legal requirements of international markets. Our
success in those markets will depend, in part, on GE Fuel Systems' ability to
secure relationships with foreign resellers and our ability to manufacture
products that meet foreign regulatory and commercial requirements. In addition,
our planned international operations are subject to other inherent risks,
including potential difficulties in enforcing contractual obligations and
intellectual property rights in foreign countries and fluctuations in currency
exchange rates.
12
<PAGE>
We may not be able to protect important intellectual property
PEM fuel cell technology was first developed in the 1950s and we do not
believe we can achieve a significant proprietary position on the basic
technologies used in fuel cell systems. However, our ability to compete
effectively against other fuel cell companies will depend, in part, on our
ability to protect our proprietary technology, systems designs and
manufacturing processes. We do not know whether any of our pending patent
applications will issue or, in the case of patents issued or to be issued, that
the claims allowed are or will be sufficiently broad to protect our technology
or processes. Even if all our patent applications are issued and are
sufficiently broad, they may be challenged or invalidated. We could incur
substantial costs in prosecuting or defending patent infringement suits. While
we have attempted to safeguard and maintain our proprietary rights, we do not
know whether we have been or will be completely successful in doing so.
Further, our competitors may independently develop or patent technologies or
processes that are substantially equivalent or superior to ours. If we are
found to be infringing third party patents, we do not know whether we will be
able to obtain licenses to use such patents on acceptable terms, if at all.
Failure to obtain needed licenses could delay or prevent the development,
manufacture or sale of our fuel cell systems.
We rely, in part, on contractual provisions to protect our trade secrets and
proprietary knowledge. These agreements may be breached, and we may not have
adequate remedies for any breach. Our trade secrets may also be known without
breach of such agreements or may be independently developed by competitors. Our
inability to maintain the proprietary nature of our technology and processes
could allow our competitors to limit or eliminate any competitive advantages we
may have and prevent us from being the first company to commercialize
residential fuel cell systems, thereby harming our business prospects. See
"Business--Proprietary Rights".
Our government contracts could restrict our ability to effectively
commercialize our technology
Under some of our contracts, government agencies can require us to obtain or
produce components for our systems from sources located in the United States
rather than foreign countries. Our contracts with government agencies are also
subject to the risk of termination at the convenience of the contracting
agency, potential disclosure of our confidential information to third parties,
and the exercise of "march-in" rights by the government. March-in rights refer
to the right of the United States government or government agency to exercise
its non-exclusive, royalty-free, irrevocable worldwide license to any
technology developed under contracts funded by the government if the contractor
fails to continue to develop the technology. The implementation of restrictions
on our sourcing of components or the exercise of march-in rights could harm our
business, prospects, results of operations, or financial condition.
Our existing stockholders will control all matters requiring a stockholder vote
Upon the completion of this offering, Edison Development, Mechanical
Technology, and GE On-Site Power will retain approximately 77.4% of our
outstanding stock. If all of these stockholders were to vote together as a
group, they would have the ability to exert significant influence over our
Board of Directors and its policies. For instance, these stockholders would be
able to control the outcome of all stockholder votes, including votes
concerning director elections, charter and by-law amendments and possible
mergers, corporate control contests and other significant corporate
transactions. See "Principal Stockholders" and "Description of Capital Stock".
13
<PAGE>
Our future plans could be harmed if we are unable to attract or retain key
personnel
We have attracted a highly skilled management team and specialized workforce,
including scientists, engineers, researchers, and manufacturing and marketing
professionals. Based on our planned expansion, we will require a significant
increase in the number of our employees and outside contractors. Our future
success, therefore, will depend, in part, on attracting and retaining
additional qualified management and technical personnel. We do not know whether
we will be successful in hiring or retaining qualified personnel. Our inability
to hire qualified personnel on a timely basis, or the departure of key
employees, could harm our expansion and commercialization plans.
There has been no prior public market for our common stock
Before this offering, there has been no public market for our common stock.
Although we expect our common stock to be quoted on the Nasdaq National Market,
an active trading market for our shares may not develop or be sustained
following this offering. Purchasers in this offering may not be able to resell
their shares at prices equal to or greater than the initial public offering
price. The initial public offering price will be determined through
negotiations between us and the underwriters and may not be indicative of the
market price for these shares following this offering. See "Underwriting".
We may be subject to litigation if our stock price is volatile
The stock market has, from time to time, experienced extreme price and volume
fluctuations. Many factors may cause the market price for our common stock to
decline, perhaps substantially, following this offering, including:
. failure to meet our product development and commercialization
milestones;
. demand for our common stock;
. revenues and operating results failing to meet the expectations of
securities analysts or investors in any quarter;
. downward revisions in securities analysts' estimates or changes in
general market conditions;
. technological innovations by competitors or in competing technologies;
. investor perception of our industry or our prospects; or
. general technology or economic trends.
In the past, companies that have experienced volatility in the market price
of their stock have been the subject of securities class action litigation. We
may be involved in a securities class action litigation in the future. Such
litigation often results in substantial costs and a diversion of management's
attention and resources and could harm our business, prospects, results of
operations, or financial condition.
Provisions of Delaware law and of our charter and by-laws may make a takeover
more difficult
Provisions in our certificate of incorporation and by-laws and in the
Delaware corporate law may make it difficult and expensive for a third party to
pursue a tender offer, change in control or takeover attempt which is opposed
by our management and Board of Directors. Public stockholders who might desire
to participate in such a transaction may not have an opportunity to do so. We
also have a staggered Board of Directors which makes it difficult for
stockholders to change the composition of the Board of Directors in any one
year. These anti-takeover provisions could substantially impede the ability of
public stockholders to benefit from a change in control or change our
management and Board of Directors. See "Description of Capital Stock".
14
<PAGE>
You will suffer immediate and substantial dilution
The initial public offering price per share will be substantially higher than
the net tangible book value per share immediately after the offering. If you
purchase common stock in this offering, you will incur dilution of $9.19 per
share from the price per share you paid based on pro forma as adjusted net book
value at June 30, 1999. We also have a large number of outstanding stock
options to purchase our common stock with exercise prices significantly below
the initial public offering price of the common stock. To the extent these
options are exercised, there will be further dilution. See "Dilution" and
"Principal Stockholders".
Future sales of our common stock could adversely affect our stock price
Substantial sales of our common stock in the public market following this
offering, or the perception by the market that such sales could occur, could
lower our stock price or make it difficult for us to raise additional equity
capital in the future. After this offering, we will have 42,208,480 shares of
common stock outstanding. Of these shares, the 6,000,000 shares sold in this
offering will be freely tradeable. All the remaining 36,208,480 shares are
subject to 180-day lock-up agreements. Up to 25,049,850 shares may be available
for sale in the public market 180 days after the date of this prospectus.
In addition, after this offering, we also intend to register 5,671,191 shares
of common stock for issuance under our stock option and grant plan and
1,000,000 shares of common stock under our employee stock purchase plan. As of
September 30, 1999, options to purchase 3,377,189 shares of common stock were
issued and outstanding, of which options to purchase 1,220,782 shares have
vested. See "Underwriting" and "Shares Eligible for Future Sale".
We cannot predict if future sales of our common stock, or the availability of
our common stock for sale, will harm the market price for our common stock or
our ability to raise capital by offering equity securities.
We may experience Year 2000 compliance problems
Our product development activities are dependent upon the use of computer
systems. As a result, we are vulnerable to the "Year 2000" issue which means
that our computer systems could fail or create erroneous data as a result of
misinterpreting the year designation "00" on January 1, 2000. We have completed
a review and evaluation of the potential impact of this issue on our computer
systems and believe that all of our material computer systems will function
properly although we can give no assurance in this regard. We have also
completed a review and assessment to identify all other time dependent systems
and have determined that all systems critical to our business have been
verified to be Year 2000 compliant. We have not fully assessed the state of
Year 2000 readiness of our suppliers and customers and do not know whether Year
2000 related difficulties of third parties could have a material impact on our
business, prospects, results of operations, or financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
We will have broad discretion as to the use of the net proceeds from this
offering
Our Board of Directors and our management will have broad discretion over the
use of the net proceeds of this offering. Investors will be relying on the
judgment of our Board of Directors and our management regarding the application
of the net proceeds of this offering. See "Use of Proceeds".
15
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of 6,000,000 shares of
our common stock in this offering will be $77.3 million, at an assumed initial
public offering price of $14.00 per share, after deducting the estimated
underwriting discounts and commissions and our estimated offering expenses. We
will also receive proceeds of $84.9 million from the issuance of 9,216,666
shares of common stock upon the exercise of outstanding warrants and other
purchase rights immediately before this offering. We estimate that our total
net proceeds of $162.2 million will be used as follows:
. approximately $20.0 million will be used for manufacturing equipment,
facilities and other capital expenditures in support of
commercialization activities during 1999 and 2000; and
. approximately $142.2 million will be used for general corporate
purposes, including working capital, funds for operations, research and
product development, market development and capital expenditures after
the year 2000 and potential acquisitions.
Pending their use, we will invest these proceeds in government securities and
other short-term, investment-grade securities.
DIVIDEND POLICY
We have never declared or paid any dividends on our common stock. We
currently intend to retain our future earnings, if any, to finance the
expansion of our business and do not expect to pay any dividends in the
foreseeable future.
Payment of future cash dividends, if any, will be at the discretion of our
Board of Directors after taking into account various factors, including our
financial condition, operating results, current and anticipated cash needs and
plans for expansion.
16
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999:
. on an actual basis;
. on a pro forma basis giving effect to the issuance of 533,334 shares of
common stock for $4.0 million pursuant to a September 1999 capital call,
the issuance of 9,216,666 shares of common stock to be issued for $84.9
million upon the exercise of outstanding warrants and other purchase
rights immediately before this offering and the acquisition of real
estate from Mechanical Technology in July 1999 for $10.9 million (which
includes our assumption of $6.2 million of debt), all as described in
"Management's Discussion and Analysis of Financial Condition and Results
of Operations".
. on a pro forma, as adjusted basis to reflect the pro forma adjustments
described above and the sale of 6,000,000 shares of common stock in this
offering at an assumed initial public offering price of $14.00 per
share, after deducting the estimated underwriting discounts and
commissions and our estimated offering expenses.
<TABLE>
<CAPTION>
June 30, 1999
--------------------------------
Pro Forma,
Actual Pro Forma As Adjusted
-------- --------- -----------
(In thousands)
<S> <C> <C> <C>
Capital lease obligations...................... $ 246 $ 246 $ 246
Note payable................................... -- 6,160 6,160
-------- -------- --------
Total debt.................................... 246 6,406 6,406
-------- -------- --------
Stockholders' equity:
Class A membership interest, no par value,
40,000,000 shares authorized, 26,458,480
shares issued and outstanding............... --
Class B membership interest, no par value,
3,000,000 shares authorized, none issued.... --
Membership interest subscribed............... (4,698)
Preferred stock, $0.01 par value per share;
5,000,000 shares authorized, none issued and
outstanding, actual, pro forma, and pro
forma as adjusted........................... -- --
Common stock, $0.01 par value per share;
95,000,000 shares authorized; none issued
and outstanding, actual; 36,208,480 shares
issued and outstanding, pro forma; and
42,208,480 shares issued and outstanding,
pro forma, as adjusted...................... 362 422
Paid-in capital................................ 67,608 156,121 233,361
Deficit accumulated during the development
stage......................................... (30,604) (30,604) (30,604)
-------- -------- --------
Total stockholders' equity .................... 32,306 125,879 203,179
-------- -------- --------
Total capitalization......................... $ 32,552 $132,285 $209,585
======== ======== ========
</TABLE>
17
<PAGE>
DILUTION
As of June 30, 1999, we had a pro forma net tangible book value of $125.9
million, or $3.48 per share of common stock. Pro forma net tangible book value
per share is equal to our total tangible assets less total liabilities, divided
by the pro forma number of shares of our outstanding common stock. After giving
effect to the sale of the 6,000,000 shares of common stock offered hereby at an
assumed initial public offering price of $14.00 per share, and after deducting
the estimated underwriting discounts and commissions and our estimated offering
expenses, our pro forma net tangible book value as adjusted, as of June 30,
1999, would have been $203.2 million, or $4.81 per pro forma share of common
stock. This represents an immediate increase in pro forma net tangible book
value as adjusted of $1.33 per share to our existing stockholders and an
immediate dilution of $9.19 per share to new investors in this offering. If the
initial public offering price is higher or lower than $14.00 per share, the
dilution to new investors will be higher or lower, respectively. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $14.00
Pro forma net tangible book value per share before this
offering........................................................ $3.48
Increase per share attributable to this offering................. 1.33
-----
Pro forma net tangible book value per share after this offering.... 4.81
------
Dilution per share to new investors................................ $ 9.19
======
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1999, the
difference between existing stockholders and new investors with respect to the
number of shares of common stock purchased, the total consideration paid and
the average price per share paid. The table assumes that the initial public
offering price will be $14.00. If the underwriters' over-allotment option is
exercised in full, the percentage of the total number of shares of common stock
held by existing stockholders will decrease from 85.8% to 84.0% of the total
number of shares of common stock outstanding after the offering, and the
percentage of the total number of shares of common stock held by new investors
will increase from 14.2% to 16.0% of the total number of shares of common stock
outstanding after the offering.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ -------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders..... 36,208,480 85.8% $156,482,964 65.1% $ 4.32
New investors............. 6,000,000 14.2 84,000,000 34.9% 14.00
---------- ----- ------------ -----
Total................... 42,208,480 100.0% $240,482,964 100.0%
========== ===== ============ =====
</TABLE>
The table excludes:
. up to 900,000 shares that may be issued by us pursuant to the
underwriters' overallotment option;
. 3,377,189 shares of common stock issuable upon exercise of stock options
outstanding at September 30, 1999 at a weighted average exercise price
of $4.98 per share;
. 2,561,002 shares of common stock available for future grant under our
1999 stock option plan as of September 30, 1999 (plus an additional
984,000 shares of common stock to become available for future grant
under our 1999 stock option plan as a result of this offering); and
. 1,000,000 shares of common stock reserved for purchase after this
offering under our employee stock purchase plan.
To the extent these shares are issued, there will be further dilution to new
investors. See "Management" and the notes to our financial statements included
elsewhere in this prospectus.
18
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following tables present selected historical financial data for the
period from June 27, 1997 (date of inception) through December 31, 1997, the
year ended December 31, 1998 and the six month periods ended June 30, 1998 and
1999. The balance sheet data as of December 31, 1997 and 1998 and the statement
of operations data for the period from inception through December 31, 1997 and
for the year ended December 31, 1998 have been derived from financial
statements (including those set forth elsewhere in this prospectus) that have
been audited by PricewaterhouseCoopers LLP, independent accountants. The
statement of operations data for the six month periods ended June 30, 1998 and
1999 and the balance sheet data as of June 30, 1999 are derived from our
unaudited financial statements and, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of our results of operations and financial condition for
those periods. The data for the six-month period ended June 30, 1999 are not
necessarily indicative of results for the year ending December 31, 1999 or any
future period.
<TABLE>
<CAPTION>
Period from
June 27, 1997 to Year ended
December 31, December 31, Six months ended June 30,
---------------- ------------ -----------------------------
1997 1998 1998 1999
---------------- ------------ ------------ -------------
(Unaudited) (Unaudited)
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Statement of Operations
Data:
Contract revenue........ $ 1,194 $ 6,541 $ 2,549 $ 3,696
Cost of contract
revenue................ 1,227 8,864 3,439 5,118
------- ------- ------------ -------------
Loss on contracts....... (33) (2,323) (890) (1,422)
In-process research and
development............ 4,042 -- -- --
Research and development
expense................ 1,301 4,632 2,154 7,780
General and
administrative
expense................ 630 2,754 1,328 6,069
------- ------- ------------ -------------
Operating loss......... (6,006) (9,709) (4,372) (15,271)
Other income,
principally interest... 103 93 42 218
------- ------- ------------ -------------
Loss before equity in
losses of affiliate... (5,903) (9,616) (4,330) (15,053)
Equity in losses of
affiliate.............. -- -- -- (32)
------- ------- ------------ -------------
Net loss.............. $(5,903) $(9,616) $(4,330) $(15,085)
======= ======= ============ =============
Basic and diluted net
loss per share......... $ (0.62) $ (0.71) $ (0.40) $ (0.71)
======= ======= ============ =============
Shares used in computing
basic and diluted net
loss per share......... 9,500 13,617 10,865 21,299
======= ======= ============ =============
<CAPTION>
December 31, June 30,
------------------------- -------------
1997 1998 1999
------------ ------------ -------------
(Unaudited)
(In thousands)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents................ $ 3,080 $ 3,993 $ 17,243
Working capital.......................... 2,667 2,692 13,570
Total assets............................. 4,847 8,093 37,233
Long-term obligations.................... -- -- 155
Total stockholders' equity............... 3,597 5,493 32,306
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with Plug Power's
financial statements, the notes to those financial statements and other
financial information appearing elsewhere in this prospectus. In addition to
historical information, the following discussion and other parts of this
prospectus contain forward-looking statements that reflect our plans,
estimates, intentions, expectations and beliefs. Our actual results could
differ materially from those discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those set forth in the "Risk Factors" section and contained
elsewhere in this prospectus.
Plug Power was formed in June 1997 as a Delaware limited liability company.
Immediately before this offering, we will merge into a newly-formed Delaware
corporation and all of our outstanding equity interests will be converted on a
one-for-one basis into shares of common stock. Unless otherwise indicated, all
information that we present in this prospectus for any date or period gives
effect to the merger as if it had occurred on such date or as of the beginning
of such period and all references to capital stock in this prospectus for
periods prior to the merger mean our issued and outstanding membership
interests.
Overview
Plug Power is a leading designer and developer of on-site, electricity
generation systems utilizing proton exchange membrane (PEM) fuel cells for
residential applications. GE Fuel Cell Systems, LLC, a joint venture 75% owned
by General Electric's GE Power Systems business and 25% owned by Plug Power,
will market, sell, service, and install our product.
Plug Power was formed in June 1997 as a joint venture to further the
development of fuel cells for electric power generation in residential and
other applications. Through September 30, 1999, our existing stockholders in
the aggregate have contributed $45.9 million in cash and $25.5 million in other
contributions, consisting of in-process research and development, real estate,
other in-kind contributions and a 25% interest in GE Fuel Cell Systems. Five of
our eight existing stockholders have committed to invest an additional $84.9
million in cash upon the exercise of outstanding warrants and purchase
commitments immediately before the closing of this offering. Since inception,
we have devoted substantially all of our resources toward the development of
our PEM fuel cell systems.
We are a development stage company and expect to bring our first commercial
product to market in 2001. Through June 30, 1999, we derived all of our revenue
from government research and development contracts. Substantially all of these
government contracts relate to PEM fuel cell research and development with a
focus on automotive applications. We believe most of the technology developed
under these government contracts is easily transferable to residential fuel
cell applications.
Since our inception in June 1997, we have raised capital through the issuance
of equity, formed strategic alliances with suppliers of key components,
developed distributor and customer relationships, and entered into development
and demonstration programs with electric utilities, government agencies and
other energy providers. In 1999, we expect to produce approximately 50 test and
evaluation systems which will be installed in laboratory and field locations
for field and market testing. Based on the system performance and market data
provided by these field trials, we will determine the final design of our first
pre-commercial product. During 2000 we expect to manufacture approximately 500
pre-commercial residential fuel cell systems to further our field testing
activities and prepare for commercial production, which is planned to begin in
2001. We do not expect significant product sales until after we begin
commercial production.
20
<PAGE>
From inception through June 30, 1999 we incurred losses of $30.6 million. We
expect to continue to incur losses as we expand our product development and
commercialization program and prepare for the commencement of manufacturing
operations. We expect that losses will fluctuate from quarter to quarter and
that such fluctuations may be substantial as a result of, among other factors,
the number of systems we produce and install for internal and external testing,
the related service requirements necessary to monitor those systems and
potential design changes required as a result of field testing. There can be no
assurance that we will manufacture or sell residential fuel cell systems
successfully or ever achieve or sustain product revenues or profitability.
Results of Operations
Comparison of the Six Months Ended June 30, 1998 and June 30, 1999
Revenues. Through June 30, 1999, our revenues have been derived exclusively
from cost reimbursement government contracts relating to the research and
development of PEM fuel cell technology. These contracts provide for the
partial recovery of direct and indirect costs from the specified government
agency, generally requiring us to absorb from 25% to 50% of contract costs
incurred. Contract revenues increased from $2.5 million for the six months
ended June 30, 1998 to $3.7 million for the six months ended June 30, 1999. As
of June 30, 1999, we have three ongoing government contracts which we expect
will produce approximately $7.6 million in contract revenue over the next eight
quarters.
We expect to continue to pursue government contracts that relate to the
further development and commercialization of PEM fuel cells and have been
awarded several additional contracts totaling $16.5 million that commenced in
the quarter ending September 30, 1999 and continue through 2003. These are also
cost reimbursement contracts in which the specific government agency will
reimburse us for 50% of the costs we incur. As a result, we will report a loss
on these contracts. We expect to continue to incur losses on future government
contracts awarded while developing proprietary information that we expect will
enhance our ability to commercialize our PEM fuel cell systems.
We expect to begin manufacturing pre-commercial residential fuel cell systems
during 2000. All users of these systems will be expected to participate in
field trials and evaluations designed to test system performance, market
conditions and customer preferences, including usage patterns, fuel
availability, buying criteria, and regulatory matters. We intend to use this
data to achieve optimal product design and speed commercialization and mass
market acceptance. The information obtained from the field test results will be
used to improve the design and performance of the commercial units planned for
production and sale in the year 2001. GE Fuel Cell Systems has committed to
purchase from us, on a take or pay basis, 485 of the pre-commercial residential
fuel cell systems prior to December 31, 2000. The total sales price for these
units will be approximately $10.3 million.
Cost of revenues. Cost of contract revenues includes compensation and
benefits for the engineering and related support staff, fees paid to outside
suppliers for subcontracted components and services, fees paid to consultants
for services provided, materials and supplies used and other general overhead
costs directly allocable to specific government contracts. Cost of contract
revenue was $3.4 million for the six months ended June 30, 1998 as compared to
$5.1 million for the six months ended June 30, 1999. This increase relates to
the additional staff and related support costs necessary to earn the additional
contract revenue as reported. The result was a loss on contracts of $890,000
for the six months ended June 30, 1998 compared to a loss on contracts of $1.4
million for the six months ended June 30, 1999.
We expect the cost to produce our initial systems to be higher than their
sales price under the terms of our distribution arrangements with GE Fuel Cell
Systems and Edison Development. We expect to continue to experience costs in
excess of product sales until we achieve higher production levels, which we do
not expect will occur until after 2002.
21
<PAGE>
Research and Development. Research and development expense includes
compensation and benefits for the engineering and related staff, expenses for
contract engineers, materials to build prototype units, fees paid to outside
suppliers for subcontracted components and services, supplies used, facility
related costs, such as computer and network services and other general overhead
costs. Research and development expenses increased from $2.2 million for the
six months ended June 30, 1998 to $7.8 million for the six months ended June
30, 1999. The increase was a result of the growth of Plug Power's research and
development activities focused on residential PEM fuel cell systems.
We expect to significantly increase our spending on research and development
in the future in order to bring our residential PEM fuel cell systems to the
marketplace by 2001. Beyond 2001, we plan to continue development activities
related to performance improvements of the residential PEM fuel cell system and
to develop other commercial PEM fuel cell applications.
General and Administrative. General and administrative expense includes
compensation, benefits and related costs in support of our general corporate
functions, including general management, finance and accounting, human
resources, business development, information and legal services. General and
administrative expenses increased from $1.3 million for the six months ended
June 30, 1998 to $6.1 million for the six months ended June 30, 1999. The
increase was primarily due to a $2.3 million charge for non-cash stock-based
compensation and a $1.9 million write-off of deferred rent, both further
explained below. We expect general and administrative expenses to increase in
future years as we prepare for expected increased sales volume.
The $2.3 million charge for non-cash stock-based compensation represents the
aggregate fair value of stock granted to Mechanical Technology. Our original
formation agreements provided for Mechanical Technology to earn non-cash
credits relating to services it rendered prior to our formation in connection
with securing future government contracts. Upon our formation, Mechanical
Technology contributed its fuel cell operations to Plug Power and we received
the right to these government contracts if ever awarded in the future. When
these contracts were awarded to us, Mechanical Technology earned the non-cash
credits, entitling it to receive 2,250,000 shares of common stock with a fair
value at the time of grant of $2.3 million. Accordingly, we recognized $2.3
million in non-cash stock-based compensation expense during the first six
months of 1999.
In June 1999, we entered into a real estate purchase agreement with
Mechanical Technology to acquire our current facility, a portion of which we
previously leased from them. As a result, we wrote off deferred rent expense in
the amount of $1.9 million. We originally recorded $2.0 million for deferred
rent in October 1998, representing the value of a ten-year lease agreement with
Mechanical Technology at favorable lease rates. See "Liquidity and Capital
Resources--Capital Contributions by Initial Investors".
Other Income. Other income consists principally of interest income earned on
our cash and cash equivalents. Other income increased from $41,000 for the six
months ended June 30, 1998 to $218,000 for the six months ended June 30, 1999.
The increase was due to interest earned on higher balances of cash and cash
equivalents available during the six months ended June 30, 1999.
Equity in losses of affiliate. Equity in losses of affiliate of $31,698 is
our proportionate share of the losses of GE Fuel Cell Systems for the period
ended June 30, 1999, which we account for under the equity method of
accounting. See "Liquidity and Capital Resources--GE Fuel Cell Systems."
Income Taxes. No benefit for federal and state income taxes is reported in
the financial statements, since before the merger, which will occur immediately
before the closing of this offering, we had elected to be taxed as a
partnership. Therefore, for the periods presented, the federal and state income
tax benefits of our losses were recorded by our stockholders. Subsequent to our
merger into a C corporation immediately before the closing of this offering, we
will account for
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income taxes in accordance with Statement of Financial Accounting Standards No.
109 (SFAS 109), "Accounting for Income Taxes", and expect to be subject to an
effective tax rate of 40%. Had we applied the provisions of SFAS 109 since
inception, the deferred tax asset generated, primarily from net operating loss
carryforwards, would have been offset by a full valuation allowance. We believe
any tax benefit resulting from expected operating losses occurring after our
conversion to a C corporation will also have a full valuation allowance.
Comparison of the Period from June 27, 1997 (Date of Inception) to December
31, 1997 and the Year Ended December 31, 1998
Revenues. Our revenues during this period were derived exclusively from cost
reimbursement government contracts relating to the development of PEM fuel cell
technology. These contracts provide for the partial recovery of direct and
indirect costs from the specified government agency, generally requiring us to
absorb from 25% to 50% of contract costs incurred. Contract revenues increased
from $1.2 million for the period from inception through December 31, 1997 to
$6.5 million for the year ended December 31, 1998. This increase was due to
twelve months of activity in 1998 compared to six months in the period from
inception through December 31, 1997, combined with increased government
contract activities.
Cost of revenues. Cost of contract revenue includes compensation and benefits
for the engineering and related support staff, fees paid to outside suppliers
for subcontracted components and services, fees paid to consultants for
services provided, materials and supplies used and other directly allocable
general overhead costs allocated to specific government contracts. Cost of
contract revenue was $1.2 million for the period from inception through
December 31, 1997 as compared to $8.9 million for the year ended December 31,
1998. This increase in costs was due to twelve months of activity in 1998
compared to six months in the period from inception through December 31, 1997,
combined with the additional staff and related support costs necessary to earn
the additional contract revenue as reported. The result was a loss on contracts
of $33,000 for the year ended December 31, 1997 compared to a loss on contracts
of $2.3 million for the year ended December 31, 1998.
Research and Development. Research and development expense includes
compensation and benefits for the engineering and related staff, expenses for
contract engineers, materials to build prototype units, fees paid to outside
suppliers for subcontracted components and services, supplies used, facility
related costs, such as computer and network services and other general overhead
costs. Research and development expenses increased from $1.3 million in the
period from inception through December 31, 1997 to $4.6 million for the year
ended December 31, 1998, an increase of $3.3 million. This increase was related
to Plug Power's research and development activities focused on residential PEM
fuel cell systems in the year ended December 31, 1998 over that expensed for
the period from inception through December 31, 1997.
At inception, we recorded a $4.0 million in-process research and development
expense related to Mechanical Technology's initial equity contribution. Two
unaffiliated parties, Edison Development and Mechanical Technology, negotiated
at arm's length to form Plug Power and determined that the total value of the
in-process research and development, fixed assets, and trained workforce
contributed by Mechanical Technology was $4.8 million. Accordingly, we have
allocated the investment as follows (in thousands):
<TABLE>
<S> <C>
In-process research and development $4,043
Fixed assets 357
Trained workforce 350
</TABLE>
The in-process research and development contributed by Mechanical Technology
upon our formation related exclusively to the development of PEM fuel cells and
fuel cell systems. This project was the only one in process when it was
contributed and was in its early stages of development.
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The Mechanical Technology contribution included research and test results
related to the validation of initial plate and flow field designs, as well as
cooling and humidification schemes and initial designs regarding systems
integration. This initial work provided the framework to facilitate our
continuing efforts to commercialize the technology.
At the time of Mechanical Technology's contribution, neither the cost nor the
time required to complete this project and its successful commercialization was
known. We have produced and are currently demonstrating a number of test and
evaluation systems and are continuing our efforts to decrease the cost of our
system's components and subsystems, improve its overall reliability and
efficiency, and ensure its safety. We must complete substantial additional
research and development on our fuel cell systems and secure relationships with
suppliers of our required components and subsystems before we will have a
commercially viable product. As of June 30, 1999, we have spent in excess of
$13.0 million on this project, and we expect to spend an additional $60.0
million to $70.0 million on research and development related to the
commercialization of the residential fuel systems prior to the end of 2001,
when we plan to bring our first fuel cell systems to market.
The amount allocated to the in-process research and development contributed
to us by Mechanical Technology represents its estimated fair value based on the
negotiations of the two parties and is consistent with its value under the cost
valuation approach. Under the cost valuation approach, value is measured by
quantifying the cost of replacing the future service capability of the acquired
property without considering the amount of economic benefits that can be
achieved, or the time period over which they might continue.
The contributed in-process research and development was early development
stage property, which did not and currently does not have commercial viability
or any alternative future use and which will require substantial additional
expenditures to commercialize. Accordingly, we charged the assigned value to
operations at the time of contribution.
General and Administrative. General and administrative expense includes
compensation, benefits and related costs in support of our general corporate
functions, including general management, finance and accounting, human
resources, business development, information and legal services. General and
administrative expenses increased from $630,000 for the period from inception
through December 31, 1997 to $2.8 million for the year ended December 31, 1998.
The increase was due to twelve months of activity in 1998 compared to six
months in the period from inception through December 31, 1997, combined with
increased personnel cost and general expenses associated with expanding
operations.
Other Income. Other income consists principally of interest income earned on
our cash and cash equivalents. Other income was $103,000 for the period from
inception through December 31, 1997 and $93,000 for the year ended December 31,
1998.
Income Taxes. No benefit for federal and state income taxes is reported in
the financial statements, since before the merger, which will occur immediately
before the closing of this offering, we had elected to be taxed as a
partnership. Therefore, for the periods presented, the federal and state income
tax benefits of our losses were recorded by our stockholders. Subsequent to our
conversion from a limited liability company to a C corporation, we will account
for income taxes in accordance with SFAS 109. Had we applied the provisions of
SFAS 109 since inception, the deferred tax asset generated, primarily from net
operating loss carryforwards, would have been offset by a full valuation
allowance.
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<PAGE>
Liquidity and Capital Resources
Summary
Our cash requirements depend on numerous factors, including completion of our
product development activities, ability to commercialize our residential fuel
cell systems, market acceptance of our systems and other factors. We expect to
devote substantial capital resources to continue our development programs
directed at commercializing our fuel cell systems for worldwide residential
use, to hire and train our production staff, develop and expand our
manufacturing capacity, begin production activities and expand our research and
development activities. We believe that our current cash balances, the proceeds
we will receive in connection with the exercise by five of our eight existing
stockholders of warrants and other purchase rights immediately before the
closing of this offering, and the net proceeds from this offering will provide
us with sufficient capital to fund operations through 2001.
We have financed our operations through June 30, 1999 primarily from the sale
of equity which has provided us cash of $41.9 million. We anticipate incurring
substantial additional losses over at least the next several years.
As of June 30, 1999, we had cash and cash equivalents totaling $17.2 million.
As a result of our purchase of real estate from Mechanical Technology, we were
required to escrow $6.2 million of the $17.2 million in cash to secure the debt
assumed on the purchase. Since inception, net cash used in operating activities
has been $16.4 million and cash used in investing activities has been $8.2
million. For the reasons stated above, we expect that our cash requirements
will increase in future periods.
Capital Contributions by Initial Investors
Plug Power was formed in June 1997 as a joint venture between Mechanical
Technology and Edison Development. At formation, Mechanical Technology
contributed assets related to its fuel cell program, including intellectual
property, 22 employees, equipment, and the right to receive government
contracts for research and development of PEM fuel cell systems, if awarded.
Edison Development contributed or committed to contribute $9.0 million in cash,
expertise in distributed power generation and marketplace presence to
distribute and sell stationary fuel cell systems.
In June 1999 we entered into a real estate purchase agreement with Mechanical
Technology to acquire approximately 36 acres of land, two commercial buildings,
and a residential building located in Latham, New York. This property is the
location of our current facilities and we are presently constructing our new
production facility at this site.
As part of the real estate transaction with Mechanical Technology, we assumed
a $6.2 million letter of credit issued by KeyBank National Association for the
express purpose of servicing $6.2 million of debt related to Industrial
Development Revenue Bonds issued by the Town of Colonie Industrial Development
Agency. As consideration for the purchase, we issued 704,315 shares of common
stock to Mechanical Technology, valued at $6.67 per share. The transaction
closed in July 1999 and a receivable for membership interests of $4.7 million
was recorded as shares subscribed as of June 30, 1999. In connection with this
transaction, we wrote off deferred rent expense in the amount of $1.9 million
during the first six months of 1999. This deferred rent expense related to a
10-year facilities lease, at a favorable lease rate, on one of the purchased
buildings. In connection with the July 1999 closing, we agreed to lease some of
the office and manufacturing space back to Mechanical Technology on a short-
term basis.
In June 1999, Edison Development purchased 704,315 shares of common stock for
$4.7 million in cash under provisions of our original formation documents that
allowed Edison Development and Mechanical Technology to maintain equal
ownership percentage in Plug Power. This equity contribution was recorded as of
June 30, 1999.
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<PAGE>
As of June 30, 1999, Mechanical Technology had made aggregate cash
contributions of $4.5 million plus non-cash contributions of $9.5 million and
we had a receivable for membership interests from Mechanical Technology of $4.7
million, while Edison Development had made aggregate cash contributions of
$18.7 million.
Capital Calls
In January 1999, we entered into an agreement with Mechanical Technology and
Edison Development. Pursuant to this agreement, we have the right to require
Edison Development and Mechanical Technology to contribute $7.5 million each in
1999 and $15.0 million each in 2000 in exchange for which each will receive
common stock valued at $7.50 per share. The agreement terminates on the earlier
of December 31, 2000 or upon an initial public offering of our shares at a
price greater than $7.50 per share. The agreement permits Mechanical Technology
and Edison Development to contribute any funds not previously called by us on
the termination date in exchange for shares at a price of $7.50 per share. In
September 1999, we made a capital call of $4.0 million, and Mechanical
Technology and Edison Development each contributed $2.0 million in cash in
exchange for 266,667 shares of common stock. Mechanical Technology and Edison
Development have committed to contribute the remaining $41.0 million
immediately before this offering in exchange for an aggregate of 5,466,666
shares of common stock.
GE Fuel Cell Systems
In February 1999, we entered into an agreement with GE On-Site Power to
create GE Fuel Cell Systems, a joint venture owned 75% by GE On-Site Power and
25% by Plug Power, which is dedicated to marketing, selling, installing, and
servicing Plug Power residential fuel cell systems on a worldwide basis (other
than in the states of Illinois, Indiana, Michigan and Ohio). See "Business--
Distribution and Marketing".
In connection with the formation of GE Fuel Cell Systems, we issued 2,250,000
shares of our common stock to GE On-Site Power in exchange for a 25% interest
in GE Fuel Cell Systems. Of these, 750,000 shares vested immediately and the
remaining 1,500,000 shares vested in August 1999. As of the date of issuance of
such shares, we capitalized $11.3 million, the fair value of the shares issued,
under the caption "Investment in affiliate" in our financial statements.
We also issued a warrant to GE On-Site Power to purchase 3,000,000 additional
shares of common stock at a price of $12.50 per share. GE On-Site Power has
committed to exercise this warrant immediately before this offering for a total
exercise price of $37.5 million in cash.
General Electric has agreed to provide capital to GE Fuel Cell Systems, in
the form of loans, to fund GE Fuel Cell Systems' commitment to purchase 485
pre-commercial systems during the period ending December 31, 2000. General
Electric has also agreed to provide additional capital, in the form of a loan
not to exceed $8.0 million, to fund GE Fuel Cell Systems' ongoing operations.
Southern California Gas Company
In April 1999, Southern California Gas Company purchased 1,000,000 shares of
common stock for $6.7 million and agreed to spend $840,000 for market research
and services related to distributed power generation technologies, including
PEM fuel cell systems. In the event Southern California Gas does not expend
these amounts by April 2002, up to 111,851 previously issued shares may be
returned. Additionally, Southern California Gas received warrants to purchase
an additional 350,000 shares of common stock at an exercise price of $8.50 per
share. Southern California Gas has committed to exercise these warrants
immediately before this offering for a total exercise price of $3.0 million in
cash.
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<PAGE>
Private Investors
In February 1999, two investors, including Michael J. Cudahy, a director of
Plug Power, purchased 1,500,000 shares of common stock for a total of $10.0
million. In addition, Mr. Cudahy received a warrant to purchase 400,000 shares
of common stock at a price of $8.50 per share. Mr. Cudahy has committed to
exercise this warrant immediately before this offering for a total exercise
price of $3.4 million in cash. In April 1999 an unrelated investor purchased
299,850 common shares for $2.0 million.
Line of Credit
In October 1999, we entered into a loan agreement for a $6.0 million line of
credit from KeyBank, National Association. The line of credit bears interest at
the prime rate in effect from time to time, matures upon the earlier of the
closing of this offering or November 30, 1999, and is collateralized by an
assignment of our right to call capital from Mechanical Technology and Edison
Development.
Year 2000 Readiness Disclosure
The statements in the following section include "Year 2000 readiness
disclosure" within the meaning of the Year 2000 Information and Readiness
Disclosure Act of 1998. The protections of this Act do not apply to claims
under the anti-fraud provisions of the federal securities laws.
Introduction
The Year 2000 issue relates to the various problems that may result from the
improper processing of dates and date-sensitive calculations by computers and
other machinery as the year 2000 is approached and reached. These problems
arise from hardware and software unable to distinguish dates in the "2000s"
from dates in the "1900s" and from other sources such as the use of special
codes and conventions in software that make use of date fields. These problems
could result in a system failure or miscalculations causing disruptions of
operations, including a temporary inability to process transactions, send
invoices or engage in other normal business activities. The Year 2000 issue may
pose additional problems due to the fact that Year 2000 is a leap year and some
computers and programs may fail to recognize the extra day.
Our State of Readiness
We have completed a review and evaluation of the potential impact that the
change in the date to the Year 2000 will have on our computer systems. As a
result of this review, we have determined that all of our major computer
systems are able to recognize and appropriately process dates commencing in the
Year 2000. Our computer systems are based upon commercial personal computer-
based software packages. All such software packages have been examined for
their compliance and appropriate upgrades are being purchased and installed.
Existing personal computer systems that are not Year 2000 compliant are
scheduled for replacement prior to October 1999. We have also completed a
review and assessment to identify all other computer-related systems and time
dependent processes and have determined that all of our business critical
systems have been verified to be Year 2000 compliant. New systems acquired
during 1999 have also been reviewed to verify that they are Year 2000
compliant.
Cost to Address Year 2000 Issues
Our historical costs to assess our Year 2000 readiness have been negligible.
We are not currently able to estimate the final aggregate cost of addressing
the Year 2000 issue because funds may be required as a result of future
findings. The majority of the costs required to complete our
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<PAGE>
Year 2000 compliance process will be incurred as part of our normal capital
asset acquisition program and would have been incurred without consideration of
Year 2000 issues. We do not expect these costs to have an adverse effect on our
business and financial results.
Risks Presented by Year 2000 Issues
Computer systems are also used to operate and monitor our fuel cell systems.
However, due to the early stage of commercialization of our fuel cell systems,
any potential failures of our test and evaluation systems related to the Year
2000 are not expected to have a material impact on our product development or
commercialization schedule. During mid-1999, all key suppliers received a copy
of our Year 2000 compliance questionnaire. To date approximately 40% have
replied that they are or will be compliant prior to Year 2000. We are re-
contacting suppliers that have not yet responded. We plan to have responses
from all key suppliers by October 1999. We ask all new suppliers to confirm
their Year 2000 compliance. We are contacting all suppliers of equipment and
services that may be date- and time-sensitive to verify that their products and
equipment will meet with Year 2000 standards. We are unable to fully assess the
state of Year 2000 readiness of our suppliers and customers. Given our current
development state and our pilot scale production volumes, we do not anticipate
that Year 2000 related difficulties in third parties will have a material
impact on our business activities or prospects.
Our Contingency Plans
We do not have, but we will continue to evaluate the need for, a contingency
plan for business risks that might result from Year 2000-related events. As we
progress with our Year 2000 readiness plan and identify specific risk areas, we
intend to implement appropriate remedial actions and contingency plans.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 (SFAS 131), "Disclosure about Segments
of an Enterprise and Related Information." SFAS 131 establishes new standards
for the way companies report information about operating segments in annual
financial statements. The disclosures prescribed by SFAS 131 are effective for
the year ended December 31, 1998. We do not believe we operate in more than
one segment.
Quantitative and Qualitative Disclosures About Market Risk
We invest our excess cash in interest-bearing, investment-grade securities
that we hold for the duration of the term of the respective instrument. We do
not utilize derivative financial instruments, derivative commodity instruments
or other market risk sensitive instruments, positions or transactions in any
material fashion. Accordingly, we believe that, while the investment-grade
securities we hold are subject to changes in the financial standing of the
issuer of such securities, we are not subject to any material risks arising
from changes in interest rates, foreign currency exchange rates, commodity
prices, equity prices or other market changes that affect market risk sensitive
instruments.
Forward-looking Statements
This prospectus contains forward-looking statements. You can identify these
statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate" and "continue" or similar words. You should
read statements that contain these words carefully because they discuss our
future expectations, contain projections of our future results of operations or
of our financial condition or state other "forward-looking" information. We
believe that it is important to
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<PAGE>
communicate our future expectations to our investors. However, there may be
events in the future that we are not able to accurately predict or control and
that may cause our actual results to differ materially from the expectations we
describe in our forward-looking statements. Investors are cautioned that all
forward-looking statements involve risks and uncertainties, and actual results
may differ materially from those discussed as a result of various factors,
including product development delays, changing environmental and governmental
regulations, the ability to attract and retain employees and business partners,
future levels of government funding, competition from other manufacturers of
fuel cell systems and from other existing and advanced power technologies,
evolving markets for generating electricity and power, the ability to provide
the capital required for product development, operations and marketing, and
Year 2000 readiness. These factors should be considered carefully and readers
should not place undue reliance on our forward-looking statements. Before you
invest in our common stock, you should be aware that the occurrence of the
events described in the "Risk Factors" section and elsewhere is this prospectus
could harm our business, operating results and financial condition.
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BUSINESS
Overview
We are a leading designer and developer of on-site, electricity generation
systems utilizing proton exchange membrane (PEM) fuel cells for residential
applications. Our goal is to become the first mass market producer of
residential fuel cell systems by selling 100,000 of our systems per year by
2003. The continued growth in demand for electric power, coupled with the
ongoing deregulation of the electric industry, is creating a market opportunity
for a variety of distributed, or on-site, generation technologies. We believe
that the electricity our residential fuel cell systems will provide to homes
can be less expensive, more reliable, more efficiently produced and
environmentally cleaner than the electricity provided by the existing electric
utility grid and other power generation technologies. We intend to leverage our
strategic alliances with General Electric Company and other leading energy
companies, as well as with selected product component suppliers, to achieve
leadership in residential fuel cell system design, manufacturing, and sales.
Our Product
Our residential fuel cell system will be an appliance, initially about the
size of a refrigerator, that will produce electricity through a clean,
efficient process without combustion. Our system will receive fuel from a
home's existing natural gas line or propane tank, convert the fuel into a
hydrogen-rich stream, and then combine it with oxygen from the air in a
chemical reaction that produces electric power. Our initial residential systems
will be designed to supply 7 kW of baseload power, 10 kW of peak power, and
15 kW of surge load capacity, which will provide the full electricity needs of
a home, although the home can remain connected to the electric grid for back-up
purposes. We plan to bring our first residential fuel cell systems to market in
2001, and, by 2003, we expect to offer different model sizes designed to meet
the specific power needs of various market segments.
Our Investors
We were formed in June 1997 as a joint venture between Mechanical Technology
Incorporated and Edison Development Corporation to further the development of
fuel cells for electric power generation in residential and other applications.
Mechanical Technology is a manufacturer of advanced test and measurement
products for commercial and military customers and an early developer of fuel
cell technology. Edison Development is a subsidiary of DTE Energy Company, a
diversified energy company involved in the development and management of
energy-related businesses and services and the parent company of Detroit
Edison, Michigan's largest electric utility.
At formation, Mechanical Technology contributed its fuel cell business,
including 22 people, intellectual property, equipment, facilities and
government contracts and grants related to automotive fuel cell research, while
Edison Development contributed cash, expertise in distributed generation and
the marketplace presence to distribute and sell fuel cell systems for
residential applications. Based in part on Mechanical Technology's
contributions, we have been awarded approximately $40.0 million in federal and
state government contracts related to PEM fuel cell research and development,
substantially all of which are focused on automotive applications. We believe
most of the basic technology developed under these government contracts can be
leveraged to further our residential fuel cell development and
commercialization program.
To date, our current stockholders, including Edison Development and
Mechanical Technology, in the aggregate have contributed $45.9 million in cash
and $25.5 million in other contributions, consisting of in-process research and
development, real estate, other in-kind contributions and a 25% interest in GE
Fuel Cell Systems. Five of our eight existing stockholders have committed to
invest an additional $84.9 million in cash upon the exercise of outstanding
warrants and purchase rights
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immediately before the closing of this offering. In addition to Edison
Development and Mechanical Technology, our current stockholders include:
. GE On-Site Power, Inc., a subsidiary of General Electric Company that
operates within General Electric's GE Power Systems business, one of the
world's leading suppliers of power generation technology, energy
services, and energy management systems; and
. Southern California Gas Company, a subsidiary of Sempra Energy and the
nation's largest regulated natural gas distribution utility in terms of
customers served.
Our Alliance with General Electric Company
General Electric has selected Plug Power to be its exclusive supplier of fuel
cell systems for residential and commercial applications under 35 kilowatts
(kW). In February 1999, we entered into an agreement with GE On-Site Power to
create GE Fuel Cell Systems, LLC, a joint venture owned 75% by GE On-Site Power
and 25% by Plug Power, which is dedicated to marketing, selling, installing and
servicing Plug Power fuel cell systems. Except for distribution rights we
granted to Edison Development for the states of Illinois, Indiana, Michigan,
and Ohio, GE Fuel Cell Systems is the exclusive global distributor and servicer
of our systems. We believe that our strength in fuel cell system design and
development, coupled with General Electric's brand name, worldwide sales and
distribution network, service capabilities, and commitment to the
commercialization of our fuel cell technology, will allow us to bring the first
and best residential fuel cell system to market and, by doing so, establish the
industry standard for this new product.
Product Development
We plan to achieve mass market distribution of our residential fuel cell
systems by 2003, which we define as manufacturing and selling 100,000 units or
more in a single year. To date, we have achieved the following major milestones
along our product development and commercialization schedule:
<TABLE>
<CAPTION>
Date Milestone
---- ---------
<C> <S>
June 1998 Powered a three-bedroom home with a hydrogen-fueled
residential fuel cell system
November 1998 Demonstrated a methanol-fueled residential fuel cell system
December 1998 Selected to design and manufacture 80 test and evaluation
residential fuel cell systems for the State of New York for
installation at various test sites over the next two years
December 1998 Demonstrated a natural gas-fueled residential fuel cell
system
February 1999 Entered into agreement with GE On-Site Power to distribute
and service our residential fuel cell systems
June 1999 Began construction of a state-of-the-art, 51,000 square foot
manufacturing facility in Latham, New York
June 1999 Hired our 250th employee, up from 22 employees at inception
August 1999 Powered a three-bedroom home with a residential fuel cell
system connected to its existing natural gas pipeline
September 1999 Filed our 50th patent application relating to fuel cell
technology, system designs and manufacturing processes
</TABLE>
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Changes in the Power Industry
Industrialized societies are dependent upon reliable, on-demand electric
power. Worldwide, electricity consumption has grown rapidly in response to
economic development. Uses for electricity have grown as all segments of
society have taken advantage of its general availability, reliability and
convenience, particularly as movement towards service-based economies increases
the reliance on computers and other electronics. According to the United States
Department of Energy, electricity consumption in the United States has grown
tenfold during the second half of the century, from approximately 300 million
kilowatt-hours in 1949 to more than three billion kilowatt-hours in 1997.
Demand for electricity is expected to continue to grow as the economies of
the United States and other industrialized nations expand. At the same time,
developing nations will need additional electricity and, in some cases, basic
energy infrastructure to improve their standards of living. The Department of
Energy reports that developing nations account for approximately 85% of the
world population, but only 46% of the world's fossil fuel electricity
consumption. Nearly two billion people in the world, approximately 35% of the
global population, still do not have electricity.
Historically, demand growth has been met by expansion of the existing
infrastructure, including additional investments in centralized generating
plants, high-voltage transmission lines and distribution wires. Reliance upon
this infrastructure has been and continues to be problematic for a number of
reasons. First, according to the Department of Energy, capacity reserve margins
have decreased from 33% in 1982 to 15% in 1997, indicating the increased
potential for power outages during peak periods. Second, some areas of the
country are experiencing capacity constraints and weather-related outages due
to the nature of the existing transmission and distribution system. Finally,
there is difficulty in finding suitable locations for additional generating
plants and transmission towers, because of environmental concerns regarding
emissions from generating plants and local zoning laws.
Utility deregulation is creating new challenges and opportunities in the
electric power industry in the United States and internationally. Due in part
to regulatory changes designed to encourage competition, vertically integrated
utilities are being separated into their generation, transmission and
distribution components. New entrants have become significant participants in
the generation of electricity as the industry moves toward open competition. In
the United States, regulatory organizations at the federal, state and local
level are revising how electric service is provided. Customers in many states
have or will soon have the chance to choose their electricity provider.
Internationally, in countries such as the United Kingdom where deregulation of
the electric industry has already occurred, industrial and commercial customers
have been the primary beneficiaries of increased competition, while residential
consumers have generally not benefited.
The evolving competitive industry environment, coupled with consumer demand
for more reliable, more accessible and more competitively priced sources of
electric power, is driving traditional energy providers to develop new
strategies and seek new technologies for electricity generation, transmission
and distribution.
Plug Power's Solution
We believe our residential fuel cell systems will enable electric utilities
and other energy suppliers to meet increasing residential electricity demand in
a cost-effective, reliable, efficient and environmentally friendly manner while
avoiding the costs and problems associated with installing and maintaining
traditional generation, transmission, and distribution infrastructure. We
believe residential consumers who acquire or utilize our systems will benefit
from potential cost savings, as well as from high reliability and efficiency.
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Benefits to Energy Providers
We believe our systems will offer the following benefits to natural gas and
propane distributors, rural electric cooperatives, electric utilities, and
other energy providers:
. Lower Capital Costs and Decreased Investment Risk. Our residential fuel
cell systems will be installed on-site and will supply power directly to
a home's electric system. Consequently, electric utilities can employ
our fuel cell systems to decrease capital expenditures by deferring or
eliminating the expansion, repair or replacement of generation,
transmission and distribution assets.
. Better Utilization of Existing Fuel Distribution Infrastructure. Use of
our natural gas- and propane-fueled systems will increase consumption of
these fuels over the course of the year, enabling distributors of these
fuels to better utilize their existing assets and mitigate the
seasonality of their businesses.
. Environmental Benefits. Energy providers are facing increasing
governmental pressures to provide environmentally clean power generation
systems. Fuel cell systems generate electricity through a chemical
process that produces water, useable heat, some carbon dioxide and
negligible levels of other pollutants as by-products. By contrast,
conventional power plants burn fossil fuels to create electricity,
emitting sulfur and nitrogen oxides, relatively higher levels of carbon
dioxide, particulate matter, unburned hydrocarbons and heat pollution.
Benefits to Residential Consumers
We believe our systems will offer the following benefits to residential
consumers:
. Potential Savings. Due to our system's high energy efficiency and on-
site location, we expect that, following the beginning of mass market
production of our residential fuel cell systems, the cost of electricity
to consumers (including the consumer's cost to purchase the system and
pay for routine maintenance and periodic replacement parts over the
system's estimated 15- to 20-year life) who purchase our system
directly, or who utilize a system purchased by an energy provider, will
be equal to or less than residential grid rates in many regions.
. Better Reliability. Our residential fuel cell system will generate
electricity at the home. As a result, it will not be as susceptible to
weather-related or capacity-driven outages, which are inherent problems
for traditional central generation and/or transmission and distribution
systems.
. Higher Efficiency. Fuel cells convert fuel directly into electricity
through an on-site chemical reaction. By contrast, a typical central
generation combustion process requires a series of steps, each of which
results in energy losses. As a result, fuel cells can deliver
electricity to a home more efficiently than the grid.
. Co-Generation Potential. Our systems will produce heat as a by-product.
In the future, we plan to modify our basic system to use that excess
heat to supplement traditional residential hot water and space heating
systems, thereby significantly increasing total system efficiency and
providing expected cost savings for consumers.
Our Strategy
Our business strategy focuses on combining existing fuel cell technology with
improvements in system integration, component design, and manufacturing
processes to achieve the low-cost manufacturing capability necessary to bring
our product to the mass market. The key components of this strategy are:
. Focus on residential applications. We have selected the residential
market as our primary focus because we believe it will be the first mass
market in which fuel cell products
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will be economically viable. We also chose the residential market
because of its large size, industry trends favoring distributed
generation, and the range of benefits our fuel cell systems can provide
to energy providers and consumers. We intend to continue to leverage our
experience gained under government contracts and grants for research and
development on automotive applications to further the development of our
residential systems. We believe we can achieve manufacturing cost
reductions that will make our systems commercially viable by the end
of 2001.
. Develop low-cost manufacturing capability and processes. We have focused
our efforts on utilizing technology and designs that are conducive to
low-cost mass manufacturing. Our strategy is to create a network of
selected suppliers who, with our help, can design and develop subsystems
and components that meet our cost, performance and quality
specifications. Based on our commercialization schedule, we believe that
we can purchase our components in larger volumes from these suppliers
beginning in 2000, which should further lower costs. Internally, we will
focus on overall system design, component and subsystem integration,
final assembly and quality control. We have nearly completed
construction of a 51,000 square foot manufacturing facility that will
enable us to develop our manufacturing capabilities and implement more
efficient manufacturing processes as we move toward the
commercialization stage.
. Utilize General Electric's product development expertise and purchasing
capabilities. Under our product development agreement with General
Electric, we will consult with appliance manufacturing and plant design
experts from General Electric to complete the design of our first
commercial system. To enhance our ability to meet General Electric's
quality control standards, we will also purchase technical support
services from General Electric in the areas of engineering, testing,
manufacturing and quality control services. We believe this
collaboration will provide us with the engineering, testing and
analytical resources to develop a superior product more rapidly. We will
also be able to utilize General Electric's purchasing power to lower our
component costs.
. Leverage our strategic alliance with General Electric to achieve market
leadership. We believe our strategic alliance with General Electric
gives us a substantial competitive advantage by providing an immediate
worldwide marketing, distribution and servicing capability. GE Fuel Cell
Systems is developing a global network of qualified resellers who will
distribute our systems to consumers, co-branded with both the General
Electric and Plug Power brand names. We believe that this co-branding
strategy will give us immediate recognition in the market and speed
consumer acceptance of our systems. Once in the market, GE Fuel Cell
Systems' coordination of the installation, servicing and maintenance of
our systems will also be an important factor in developing consumer
confidence in a new, high-technology product. As a result, we expect to
achieve our goals of being the first company to bring a residential fuel
cell system to market and to become the market leader.
. Acquire or license complementary technologies. Our goal is to
manufacture the best residential fuel cell system as quickly as
possible, whether we develop components and subsystems internally or
obtain them from third party suppliers. Accordingly, we regularly review
strategic opportunities to acquire or license technologies that can
advance the development of low-cost system components and subsystems.
. Capitalize on our experience in the residential market to develop other
fuel cell applications, including automotive applications. We believe
that the fuel cell technology, system designs and manufacturing
processes that we develop and acquire during the course of
commercializing our initial residential systems can be leveraged to
develop and commercialize other fuel cell applications, including
automotive applications, combined heat and power applications, and
emergency back-up systems. Our existing automotive program, which is
funded primarily by government contracts and grants, consists
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of a team of 32 engineers and technicians focused on developing the
smaller, more powerful, lower cost and lighter weight fuel cell systems
that exhibit the rapid start-up and quick response necessary for
automotive applications. Just as we have used our automotive research to
enhance the development of the basic technologies of our residential
systems, we believe that mass production of residential systems will
give us the manufacturing experience and economies of scale needed to
address these technological challenges and produce commercial automotive
systems. We do not anticipate commercial production of automotive
systems until at least 2006 and expect that contract revenues related to
development of our initial automotive systems will be less than 10% of
our total revenues in 2001 and less than 5% of our total annual revenues
in 2002 through 2006.
Product Development and Commercialization Process
We are implementing our product development plan in four phases. Our cash
requirements during this time period will depend on numerous factors, including
the progress of our product commercialization activities, and the pace at which
we hire and train our production staff, develop and expand our manufacturing
capacity and expand our research and development activities. We believe that
our current cash balances, the proceeds from the exercise of warrants and other
purchase rights immediately before the closing of this offering, and the net
proceeds from this offering will provide us with sufficient capital to fund
operations through 2001.
. Phase 1--Research, Development and Engineering. Our 56,000 square foot
research and development facility, one of the largest fuel cell
development laboratories in the world, contains over 70 test stations
where we conduct design optimization and verification testing, rapid-
aging testing, failure mode and effects analysis, multiple technology
evaluations, and endurance testing in our effort to accelerate the
development and commercialization of our fuel cell systems. Since our
inception, we have shown considerable progress in our product
development, including demonstrating laboratory systems running on
methanol and natural gas and powering a three-bedroom home with a
residential fuel cell system fueled from the home's existing natural gas
line. Through the end of 1999, we will focus on developing and testing
residential fuel cell systems, both in the laboratory and at selected
test sites, to obtain data that can help us advance the design and
construction of low-cost systems. We will also be selecting suppliers to
provide components and subsystems for our pre-commercial and commercial
systems on a long-term basis. During 1999, we expect to produce
approximately 50 natural gas-fueled test and evaluation systems built to
varying specifications in order to test different system design
elements. These systems will be evaluated in our laboratories and at
selected test sites. Based on the data we obtain from these field
trials, we will determine the final design of our pre-commercial
product.
. Phase 2--Pre-Commercial Testing. In early 2000, we expect to begin
small-scale production of our pre-commercial systems. GE Fuel Cell
Systems has committed to purchase 485 of these systems and is expected
to place them with its local market distribution partners. All of these
partners will be expected to participate in field trials and evaluations
designed to test system design and performance, as well as customer
preferences. We intend to use this data to optimize product design and
speed commercialization and mass market acceptance. During this period
we also expect to complete development of a propane-fueled system.
. Phase 3--Manufacturing and Commercialization. In 2001, we intend to
begin producing our first commercial fuel cell systems for residential
use. These systems will include any necessary modifications identified
during pre-commercial testing. During this period, we also intend to
expand our manufacturing capabilities, beginning large scale commercial
production while continuing to refine our low-cost manufacturing
processes. By 2003, we believe we will be manufacturing over 100,000
systems per year.
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. Phase 4--Next Generation Models. In 2003, when we expect to have
achieved mass market production of our basic systems, we intend to
produce new models offering enhanced features, including models with co-
generation capabilities. In July 1999, we entered into a Collaboration
Agreement with Joh. Vaillant GmbH u. Co. to develop a residential
combined heat and power system for commercial introduction in Europe.
Vaillant is a leading European heating technology company and offers its
customers a complete range of products for central heating and hot
water. The Collaboration Agreement is contingent upon the successful
negotiation and execution of supply and distribution arrangements, as
well as product development arrangements, among Plug Power, Vaillant,
and GE Fuel Cell Systems.
Manufacturing
Our goal is to mass manufacture reliable and safe residential fuel cell
systems at the lowest cost. We have made, and expect to continue to make,
technological improvements that reduce the cost to produce our systems. We are
focusing our efforts on overall system design, component and subsystem
integration, assembly, and quality control processes. We have also begun to
establish a manufacturing infrastructure by hiring assembly and related support
staff, installing a new management information system, and developing our
manufacturing processes, including defining work centers and related
responsibilities. In November 1999, we expect to complete construction of our
new 51,000 square foot manufacturing facility, adjacent to our development
laboratories, that will allow us to begin large-scale manufacturing of our pre-
commercial and initial commercial systems.
We plan to utilize third-party suppliers who, with our assistance, can
design, develop and/or manufacture subsystems and components that achieve our
cost and reliability targets. We plan to perform significant quality testing
before we integrate any third-party subsystems and components into our final
assembled fuel cell system. We will also take advantage of General Electric's
volume purchasing capabilities to procure low-cost parts and components. As we
move toward the commercialization stage we will begin to shift our focus from
research and development to high volume production.
Based on our commercialization plan, we anticipate that our existing
facilities and our new manufacturing plant will provide sufficient capacity
through 2001, and that we will need to develop or build additional capacity in
order to achieve mass market production by 2003.
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Distribution and Marketing
Plug Power will serve as GE Fuel Cell Systems' exclusive worldwide supplier
of fuel cell systems designed for residential and commercial applications under
35kW. We believe that most residential applications and many small commercial
applications require less than 35kW. GE Fuel Cell Systems will have the
exclusive worldwide rights to market, distribute, install and service our
systems (other than in the states of Illinois, Indiana, Michigan and Ohio, in
which Edison Development will be our exclusive distributor). Under this
arrangement, we will sell our systems directly to GE Fuel Cell Systems, which,
in turn, will utilize General Electric's worldwide sales and distribution
network to identify qualified resellers who can distribute and service these
systems. Plug Power systems sold through GE Fuel Cell Systems will be co-
branded with both the General Electric and Plug Power names and trademarks, and
may also carry the brand of the local reseller.
The following chart summarizes how we expect GE Fuel Cell Systems to
distribute our residential fuel cell systems to consumers:
[A chart appears with a graphic depiction of the Plug Power and GE Fuel Cell
Systems distribution with Plug Power at the top of the chart;
GE Fuel Cell Systems, LLC (Distributor) on the next level; Natural Gas
Distributors, Propane Distributors, Rural Electric Cooperatives, Electric
Utilities and New Market Entrants listed as Resellers on the next level;
and on the final level a box captioned "Markets" under which are listed (i)
Early Target Markets (2001-2002) of Homes serviced by rural electric
cooperatives, Homes in urban and suburban load packets, High-consumption
households, Owners and builders of remote homes and Dissatisfied utility
customers, and (ii) Mass Markets (2003 and beyond) of homes utilizing natural
gas, new homes and homes in countries with inadequate or no existing electric
power infrastructure. Each of these boxes is connected by downward arrows to
the next level.]
Targeted Resellers
We expect that GE Fuel Cell Systems' resellers will have, on a regional and
local basis, pre-existing customer bases, billing and service capabilities,
brand recognition, market credibility, and regulatory expertise. Through the
use of these qualified resellers, we believe that GE Fuel Cell Systems will be
able to quickly penetrate multiple markets, avoid costly investment in sales
and support resources, leverage its sales organization, and accelerate the
technology acceptance process.
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Potential resellers include the following:
. Natural Gas Distributors. By marketing our natural gas-fueled
residential fuel cell systems within their distribution territories, we
believe natural gas distributors can increase overall gas consumption
and pipeline utilization, enabling them to develop stronger customer
relationships, mitigate the seasonality of their business and enhance
their overall revenue stream.
. Propane Distributors. Propane distributors also should be able to
leverage their existing infrastructure to increase revenue and mitigate
seasonality. Since propane is generally delivered by truck to a
widespread customer base, the potential for increasing the number of
customers serviced and/or the amount of propane distributed per delivery
route should decrease distributors' marginal service costs.
. Rural Electric Cooperatives. Generally, rural electric cooperatives
serve a geographically dispersed customer base. We expect that our on-
site, residential fuel cell systems will enable these cooperatives to
meet their service obligations to customers without incurring the
substantial cost of extending, maintaining or replacing electricity
distribution lines.
. Electric Utilities. Electric utilities can selectively install on-site
fuel cell systems to meet increased electricity demand in remote areas
or in urban and suburban areas referred to as "load pockets," which
suffer from frequent capacity-driven outages. By doing so, they can
reduce the costs associated with installing and operating new
infrastructure or modifying or repairing existing infrastructure.
. New Market Entrants. The ongoing deregulation of the electric utility
industry and the accompanying introduction of consumer choice are
spawning new market entrants into the retail electric market, including
gas and power marketers, unregulated affiliates of utilities, appliance
distributors, and energy service companies. As these new market entrants
seek to achieve a market presence, we expect that the relatively low
capital cost and ease of installation of our fuel cell systems will make
this distributed form of electricity supply particularly attractive.
Potential resellers will be required to purchase fuel cell systems only from
GE Fuel Cell Systems and to commit to minimum purchase requirements. To date,
GE Fuel Cell Systems has entered into memoranda of understanding with potential
resellers, including NJR Energy Holdings Corporation, an affiliate of New
Jersey Natural Gas Company, and Flint Energies, a Georgia-based rural electric
cooperative. We expect GE Fuel Cell Systems to enter into similar arrangements
with selected resellers around the world.
GE Fuel Cell Systems will focus on creating brand and product awareness at
the consumer level through media advertising, trade shows and other mass
marketing channels. Resellers are expected to augment this effort through local
advertising, mass mailings, catalog sales, educational seminars, promotional
pricing for systems or fuel, and bundled service offerings. Resellers may also
work with building contractors, financial institutions and other intermediaries
to create cost-effective programs to reach consumers.
Targeted Early Markets
Together with GE Fuel Cell Systems, we have conducted a preliminary
evaluation of target markets and potential customers, taking into account such
factors as average household electricity usage, ability to pay, power
availability and quality, availability of fuel, the prices of electricity and
natural gas, penetration of competing distributed generation technologies, new
capacity requirements and the cost of new capacity additions. Based on this
evaluation, we intend to target the following market segments during 2001 and
2002 for our first commercial fuel cell systems, which we estimate will be
priced to the consumer between $7,000 and $10,000, subject to market demand:
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<PAGE>
. Homes served by rural electric cooperatives. A rural electric
cooperative may choose to install fuel cell systems in homes rather than
incurring the cost to extend, maintain or replace existing power
distribution lines.
. Homes in urban and suburban load pockets. Electric utilities serving
urban and suburban load pockets may install our systems in selected
homes to lessen the frequency of capacity-driven outages.
. High-consumption households. Many high-consumption households place
importance on power quality, particularly with their increased use of
home computers and other electronics. Our systems, which are designed to
independently power the home while maintaining a grid connection as
backup, should provide a compelling solution to power quality and
reliability concerns.
. Owners and builders of remote homes. Building contractors and homeowners
often have the flexibility to choose how power will be provided to the
home. For many of these homes in remote areas, fuel cell systems can be
a cost effective and reliable alternative to new distribution
infrastructure, backup generators, or other alternative power sources.
. Dissatisfied utility customers. Some homeowners are dissatisfied with
the reliability and expense of the electricity and service provided by
the local utility company. We believe these homeowners will be willing
to try an easy-to-install alternative that could provide added
reliability without requiring them to disconnect from the grid
altogether.
Mass Markets
After introducing our first commercial systems in 2001 to our targeted early
markets, we believe that we will gain the experience and capabilities necessary
to lower the estimated price of our systems to consumers to approximately
$3,000 to $5,000, subject to market demand, expand our manufacturing capacity
and, through GE Fuel Cell Systems, extend our sales efforts to the mass market
beginning in 2003. Our targeted mass market segments will include:
. Homes utilizing natural gas. According to the National Gas Supply
Association, more than half of all homes in the United States and over
60% of newly constructed homes in the United States use natural gas for
heating and appliances. In areas with existing natural gas lines, the
cost of electricity from our natural gas-fueled residential fuel cell
systems may compare favorably to the cost of electricity from the grid.
. New homes. According to the United States Department of Housing and
Urban Development, 1.2 million single family houses were constructed in
the United States in 1998. Our residential fuel cell systems will offer
contractors and homeowners the opportunity to build developments or
individual homes powered by fuel cells rather than by the electric grid.
. Homes in countries with inadequate or no existing electric power
infrastructure. According to the World Bank, there are nearly two
billion people worldwide without electricity. In addition, many
countries have existing centralized electric power infrastructures that
are unreliable and outdated. Many of these developing countries do not
have the means to build or upgrade large, central power generation
plants and accompanying transmission and distribution networks to serve
a broad customer base. These countries may selectively purchase and
deploy fuel cell systems to supply electricity where it is most needed
as an alternative to major capital investment.
Installation, Servicing and Maintenance
GE Fuel Cell Systems has committed to provide complete product support for
Plug Power systems through its own service structure, reseller service network,
and contracts with third party service providers. We believe potential third
party service providers will include companies with
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<PAGE>
existing national service infrastructures, as well as regional companies with
strong reputations and service capabilities. Selected providers will be
required to meet General Electric's quality standards and customer needs of
timeliness, quality and cost-effectiveness.
GE Fuel Cell Systems' service program is expected to be closely coordinated
with the introduction of Plug Power's fuel cell systems, so that a sufficient
level of installation, maintenance, and customer support service will be
available in all areas where our systems are sold. We also expect that GE Fuel
Cell Systems will provide the warranty service for our products according to
terms to be mutually agreed upon by Plug Power and GE Fuel Cell Systems. We
will review GE Fuel Cell Systems' service plan and suggest modifications based
on the pace of product development and field test results. We expect that GE
Fuel Cell Systems' service plan will be completed and the requisite service
contracts in place prior to the release of our commercial units in 2001.
Fuel Cell Technology and Fuel Cell Systems
A fuel cell is a device that combines hydrogen, derived from a fuel such as
natural gas, propane, methanol or gasoline, and oxygen from the air to produce
electric power without combustion. Plug Power fuel cells consist principally of
two electrodes, the anode and the cathode, separated by a polymer electrolyte
membrane. Each of the electrodes is coated on one side with a platinum-based
catalyst. Hydrogen fuel is fed into the anode and air enters through the
cathode. Induced by the platinum catalyst, the hydrogen molecule splits into
two protons and two electrons. The electrons from the hydrogen molecule are
conducted around the membrane creating an electric current. Protons from the
hydrogen molecule are transported through the polymer electrolyte membrane and
combine at the cathode with the electrons and oxygen from the air to form water
and produce heat.
The following diagram illustrates how fuel cells work:
[A Diagram appears with a graphic depiction demonstrating the process by
which hydrocarbon fuels are passed through a PEM membrane in order to produce
electricity, water and heat and the following words appear in the diagram:
HOW FUEL CELLS WORK; Fuel cells extract hydrogen ions from hydrocarbon fuels and
combine them with oxygen to generate power...; Hydrogen molecules; Electrons;
Protons; Electricity; PEM Membrane; Electricity is generated via an
electrochemical process versus traditional combustion...; Oxygen (from air);
Water; Heat; The output from the process includes electricity, water and heat.]
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To obtain the desired level of electric power, individual fuel cells are
combined into a fuel cell stack. Increasing the number of fuel cells in a stack
increases the voltage, while increasing the surface area of each fuel cell
increases the current. Our initial residential systems will provide 7kW of
baseload power, 10kW of peak power and 15kW of surge load capacity.
We plan to design our fuel cell systems to last approximately 15 to 20 years,
with major component maintenance and replacements scheduled to occur every four
to seven years. Items such as air filters will require annual replacement. The
chart below sets forth a brief description of our systems' components and
subsystems:
<TABLE>
<CAPTION>
Component or Subsystem Description
---------------------- -----------
<C> <S>
Fuel reformer (processor) Converts or reforms the specified
hydrocarbon fuel, such as natural gas,
propane, methanol or gasoline, into a
hydrogen-rich stream for use in the fuel
cell stack. Design may differ based upon the
type of fuel used.
Fuel cell stack Produces electricity in a chemical reaction
by combining hydrogen with oxygen.
Power conditioner (inverter) Converts the direct current, or DC,
electricity created by the fuel cell stack
into alternating current, or AC, electricity
for use in the home. Also designed to handle
voltage spikes, as well as distortions
caused by the concurrent use of multiple
appliances. Design may differ based upon the
country in which it will be used.
Fuel supply subsystem Connects the fuel supply to the fuel
reformer and filters out unwanted sulfur and
other fuel contaminants.
Air supply subsystem Supplies filtered air to both the fuel
reformer and the fuel cell stack.
Water management loop Supplies humidification water to the fuel
cell stack to prevent the system from drying
out and reaction water to the fuel reformer
to facilitate the conversion of the fuel to
hydrogen.
Thermal management system Regulates the operating temperature of both
the fuel reformer and the fuel cell stack to
ensure optimum performance.
Microprocessor-based control unit Monitors system parameters and provides
control signals to the various subsystems to
maintain efficient operation. Also signals
need for service or maintenance.
Battery Powers the system from initial start until
the fuel cell stack warms up to appropriate
temperature and also provides 3 kilowatt-
hours of back-up power. Recharges while
system is in use.
</TABLE>
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The following diagram illustrates how a Plug Power fuel cell system produces
electricity:
[A Chart appears showing the components of the residential fuel cell system,
and the following words appear: Natural Gas; Air; Fuel Processor; Hydrogen;
Fuel Cell Stack; Controller; DC Electricity; DC AC Inverter; 120/240 VAC
Current; Heat and Water].
Proprietary Rights
Fuel cell technology has existed since the 19th century, and PEM fuel cells
were first developed in the 1950s. Consequently, we believe that neither we nor
our competitors can achieve a significant proprietary position on the basic
technologies used in fuel cell systems. For example, platinum catalysts have
been a standard component of fuel cells for decades. Recently, companies have
developed different formulations and methods for incorporating platinum into
the fuel cell that increases overall performance of the fuel cell while
reducing the amount of platinum required. While we have developed our own
proprietary technology to incorporate platinum which we have chosen to protect
as a trade secret, we currently purchase fuel cell components from several
vendors who have their own patented and trade secret platinum incorporation
technology. However, if these vendors were no longer willing or able to supply
such components, our own platinum incorporation technology would be available
for use, as would the platinum incorporation technologies of other potential
vendors.
Despite the inability to achieve a significant proprietary position on the
basic technologies of fuel cell systems, we believe the design and integration
of the system and system components, as well as some of the low-cost
manufacturing processes that we have developed, can be protected. Accordingly,
our overall intellectual property development and protection strategy has the
following components:
. Maximize protection of our internally developed processes and
designs. Our goal is to encourage employees to develop promising ideas
with potential business impact and then protect these ideas as patents
or trade secrets. To date, we have three issued patents and 47 patents
pending. These patents cover, among other things, fuel cell components
that
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<PAGE>
reduce manufacturing part count, fuel cell system designs that lend
themselves to mass manufacturing, improvements to fuel cell system
efficiency, reliability, and longer system life, and control strategies,
such as added safety protections and operation under extreme conditions.
Each of our employees has agreed that all inventions made or conceived
while an employee of Plug Power which are related to or result from work
or research that Plug Power performs will remain the sole and exclusive
property of Plug Power, whether patented or not.
. Monitor relevant patents issued for their impact on the development of
our systems. We actively monitor issued patents and other patent actions
that may impact the development of fuel cell systems. We also seek to
ensure that the components manufactured for us by third parties do not
infringe on patents covered by others. Our experts in the various
technical fields assess these inventions for possible interference with
Plug Power technology. Based on our assessments to date, we do not
believe that patents issued to other parties will prevent us from
reaching our strategic goals.
. Purchase selected intellectual property rights. We regularly review
strategic opportunities to acquire or license technologies that can
advance the development of low cost system components and subsystems.
Competition
There are a number of companies located in the United States, Canada and
abroad that are developing PEM fuel cell technology. Ballard Power Systems
Inc., a publicly traded company located in Vancouver, British Columbia, has
been developing PEM fuel cell technology since the mid-1980s and has attracted
substantial funding from a number of partners, including DaimlerChrysler AG and
Ford Motor Company. A number of major automotive and manufacturing companies
also have in-house PEM fuel cell development efforts. To the extent publicly
disclosed, the primary efforts of many of these companies, including Ballard
and International Fuel Cells Corporation, a subsidiary of United Technologies
Corporation, appear to have been directed toward the development of fuel cell
systems for automotive and large stationary power applications. Although we
believe approximately 10 companies have established residential fuel cell
system development programs, we believe they are still in the research and
development stage and have not yet developed the product manufacturing and
distribution infrastructure necessary to reach commercialization.
We also compete with companies that are developing other types of fuel cells.
There are four types of fuel cells other than PEM fuel cells that are generally
considered to have viable commercial applications: phosphoric acid fuel cells,
molten carbonate fuel cells, solid oxide fuel cells and alkaline fuel cells.
Each of these fuel cells differs in the component materials, as well as in its
overall operating temperature. While all fuel cell types have environmental and
efficiency advantages over traditional power sources, we believe that PEM fuel
cells can be manufactured less expensively and are more efficient and more
practical in small-scale applications.
Our systems will also compete with other distributed generation technologies,
including microturbines and reciprocating engines, available at prices
competitive with existing forms of power generation. We believe that our fuel
cell systems will have a competitive advantage in that they can be more easily
scaled to residential size and will be more efficient in handling the load
profile of residential customers. We also believe that they will be quieter,
environmentally cleaner, more efficient, and less expensive to install, service
and maintain. Our systems will also compete with solar and wind-powered
systems.
Once we begin selling our systems, we intend to compete primarily on the
basis of cost, reliability, efficiency and environmental considerations.
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Government Regulation
We do not believe that we will be subject to existing federal and state
regulatory commissions governing traditional electric utilities and other
regulated entities. We do believe that our product and its installation will be
subject to oversight and regulation at the local level in accordance with state
and local ordinances relating to building codes, safety, pipeline connections
and related matters. Such regulation may depend, in part, upon whether a system
is placed outside or inside a home. At this time, we do not know which
jurisdictions, if any, will impose regulations upon our product or
installation. We also do not know the extent to which any existing or new
regulations may impact our ability to distribute, install and service our
product. Once our product reaches the commercialization stage and we begin
distributing our systems to our target early markets, federal, state or local
government entities or competitors may seek to impose regulations. We intend to
encourage the standardization of industry codes to avoid having to comply with
differing regulations on a state-by-state or locality-by-locality basis.
Facilities
Our principal executive offices are located in Latham, New York. At our 36
acre campus, we own a 56,000 square foot research and development center and a
32,000 square foot office building that we are currently leasing to Mechanical
Technology until December 1999, and are in the process of constructing a 51,000
square foot manufacturing facility. We own all of our facilities and believe
that they are sufficient to accommodate our anticipated growth through at least
2001.
Employees
As of September 30, 1999, we had a total staff of approximately 280,
including approximately 230 full-time employees, of which approximately 120
were engineers, scientists, and other degreed professionals. We consider our
relations with our employees to be good.
Legal Proceedings
We may from time to time be involved in legal proceedings in the ordinary
course of our business. We are not currently involved in any pending legal
proceedings that, either individually or taken as a whole, could harm our
business, prospects, results of operations, or financial condition.
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MANAGEMENT
Executive Officers, Key Employees and Directors
Our executive officers, directors, director-nominees, and key employees,
their positions and their ages as of September 30, 1999, are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Executive Officers and
Directors
Gary Mittleman.......... 46 President, Chief Executive Officer and Director
William H. Largent...... 44 Chief Financial Officer and Treasurer
Gregory A. Silvestri.... 39 Senior Vice President--Operations
Louis R. Tomson......... 59 Senior Vice President--Corporate Development
Dr. William P. Acker.... 38 Vice President of Technology and Product Development
Dr. Manmohan Dhar....... 52 Vice President and Chief Engineer of the Residential Program
Michael J. Cudahy....... 75 Director
Anthony F. Earley, Jr... 49 Director
Larry G. Garberding..... 60 Director
George C. McNamee....... 52 Chairman
Dr. Walter L. Robb...... 71 Director
Robert L. Nardelli...... 51 Director-nominee
John M. Shalikashvili... 63 Director-nominee
Key Employees
Dr. Glenn A. Eisman..... 48 Chief Technology Officer
Dr. William D. Ernst.... 60 Vice President and Chief Scientist
Russel H. Marvin........ 32 Vice President of Component Engineering and Design
Ana-Maria Galeano....... 31 General Counsel and Corporate Secretary
</TABLE>
Gary Mittleman has served as President and Chief Executive Officer since June
1997 and as a director since August 1999. From October 1993 to June 1997, Mr.
Mittleman was the President of Edison Development Corporation, a wholly owned
subsidiary of DTE Energy Company, where he directed business development
efforts. Mr. Mittleman previously served as Manager of Corporate Strategy at
Ameritech, a telecommunications company. Prior to that he was employed at Booz
Allen & Hamilton, a consulting firm, in its commercial practice area and at
American Can Company. Mr. Mittleman received his Bachelor of Arts degree in
Mathematics and Master of Science degree in Mechanical and Aerospace
Engineering from the University of Rochester and a Master of Business
Administration degree, with honors, from the University of Chicago. Mr.
Mittleman is a trustee of the Albany Institute of History and Art and a trustee
of the Eastern New York State Chapter of the Nature Conservancy.
William H. Largent has served as Chief Financial Officer and Treasurer since
May 1999. From May 1997 to May 1999, Mr. Largent served as Senior Vice
President, Operations and Chief Financial Officer of Applied Innovation Inc., a
leading provider of mediation and data communications products for the
management of telecommunications providers' customer service networks. From
1994 to April 1997, Mr. Largent served as the Executive Vice President and
Chief Financial Officer of Metatec Corporation, an information services company
engaged in optical disc manufacturing and distribution, software development
and network services. Mr. Largent also served as a director of Metatec from
1990 until 1997. From 1990 to 1993, Mr. Largent was President of Liebert
Capital Management Corporation, a private investment management and consulting
company. Mr. Largent is a director of Applied Innovation, Inc. and until July
1999, was also a director AmeriLink Corporation, a company (subsequently merged
into Tandy Corp.) that designs, constructs, installs and maintains cabling
systems for transmission of audio, video and data on a national basis. Mr.
Largent, a certified public accountant, received his Bachelor of Science degree
in accounting from Franklin University.
45
<PAGE>
Gregory A. Silvestri has served as Senior Vice President--Operations since
June 1999. In that capacity, Mr. Silvestri manages the full range of
manufacturing activities, develops the strategy and structures alliances with
key component suppliers, and manages the sales and marketing interactions with
Plug Power's distribution partners. From May 1991 to May 1999, Mr. Silvestri
served in a number of senior general management positions responsible for North
American and Asia-Pacific operations for Norton Company, an operating unit of
Saint-Gobain Corporation that supplies engineered materials to a variety of
industries. Prior to that time, Mr. Silvestri served as an Engagement Manager
within the Industrial Practice Group of McKinsey & Company. Mr. Silvestri
received his Bachelor of Science and Engineering degree in Chemical Engineering
from Princeton University and a Masters in Business Administration degree, with
honors, from the University of Virginia.
Louis R. Tomson has served as Senior Vice President--Corporate Development
since January 1999. In that capacity, Mr. Tomson manages business development,
government relations and legal affairs. From January 1995 to January 1999, Mr.
Tomson was Deputy Secretary and subsequently First Deputy Secretary to Governor
George E. Pataki of the State of New York. Mr. Tomson was also the Governor's
Chief Policy Maker for energy and communications and served as the Governor's
liaison to New York's Public Service Commission and to New York's more than 60
public authorities. From 1992 to December 1994, Mr. Tomson was a partner in the
law firm of Plunkett & Jaffe in New York, New York. Mr. Tomson currently serves
as the Chairman of the New York State Thruway Authority. Mr. Tomson received a
Bachelor of Arts degree from Columbia College and a Bachelor of Law degree from
Columbia Law School.
Dr. William P. Acker has served as Vice President of Technology and Product
Development since October 1997. In that capacity, Dr. Acker manages the
development of Plug Power's fuel cell products as well as the ongoing
development of next generation fuel cell technology. From 1990 to October 1997,
Dr. Acker served in several positions for Texaco, including Global Manager for
Engineering and Product Testing. Dr. Acker received a Bachelor of Science
degree from Rensselaer Polytechnic Institute and a Master of Science, Master of
Philosophy and Ph.D. in Applied Physics and Engineering from Yale University.
Dr. Manmohan Dhar has served as Vice President and Chief Engineer of the
Residential Program since November 1998. In that capacity, Dr. Dhar is
responsible for managing the development of low-cost, highly reliable fuel cell
systems for residential electric power generation. From June 1997 to November
1998, Dr. Dhar served as our Director of Residential Programs. From 1978 to
June 1997, Dr. Dhar worked in various positions at Mechanical Technology
Incorporated, including as Chief Engineer for its Stirling Space Power Program,
an effort to develop a 12.5 kW power generation system as a backup power source
for Space Station Freedom, and, from 1993 to 1997, as a key member of
Mechanical Technology's fuel cell development efforts. Dr. Dhar has a Ph.D. in
Systems Dynamics from Purdue University, and a Master of Science degree in
Machine Design from the Indian Institute of Technology.
Michael J. Cudahy has served as a member of the Board of Directors since
February 1999. Mr. Cudahy co-founded and, prior to its sale to General Electric
Company in 1998, served from 1965 to November 1998 as Chairman of the Board,
and from 1965 to November 1997 as Chief Executive Officer, of Marquette Medical
Systems, Inc., a developer and manufacturer of medical equipment and integrated
systems for patient monitoring and diagnostic cardiology applications. Mr.
Cudahy currently serves as a Special Advisor to GE Marquette Medical Systems,
Inc. and as a director of Molecular OptoElectronics Corp., a developer and
manufacturer of optoelectronic technologies relating to information systems.
Anthony F. Earley, Jr. has served as a member of the Board of Directors since
June 1997. Mr. Earley has served as a director of DTE Energy Company since
1994, as Chairman of the Board and Chief Executive Officer of DTE Energy
Company and its subsidiary, The Detroit Edison
46
<PAGE>
Company, since 1998, and as President and Chief Operating Officer of DTE Energy
and Detroit Edison since 1994. From 1989 to 1994, Mr. Earley served as the
President and Chief Operating Officer of Long Island Lighting Company. Mr.
Earley currently serves as a director of Comerica Bank and Mutual of America
Capital Management Corporation. Mr. Earley received a Bachelor of Science
degree in physics, a Master of Science degree in engineering, and a Juris
Doctorate from the University of Notre Dame.
Larry G. Garberding has served as a member of the Board of Directors since
June 1997. Mr. Garberding has served as a director of DTE Energy Company since
1990 and as Executive Vice President and Chief Financial Officer of DTE Energy
and its subsidiary, The Detroit Edison Company, since 1995. Mr. Garberding
received a Bachelor of Science degree in industrial administration from Iowa
State University. Mr. Garberding is extensively involved with the United Way of
Southern Michigan, is a director/trustee of the Detroit Medical Center and the
Detroit Symphony Orchestra Hall, and is a Chairman of the Board of ArtServe
Michigan.
George C. McNamee has served as Chairman of the Board of Directors since June
1997. Mr. McNamee has served as Chairman since 1984 and as Co-Chief Executive
Officer since 1993 of First Albany Companies, Inc., a publicly traded holding
company the principal subsidiaries of which are First Albany Corporation, a
specialty investment banking firm and an underwriter of this offering, and
First Albany Asset Management. Mr McNamee previously served as President of
First Albany Companies from 1975 to 1989. Mr. McNamee has served as a director
of Mechanical Technology Incorporated since 1996 and as Chief Executive Officer
since 1998, and previously served as Chairman of the Board from 1996 to 1998.
Mr. McNamee also serves as a director of MapInfo Corporation, a maker of
mapping software products, application development tools, and data products,
and the META Group, Inc., a company that provides market assessments for
clients in the information technology industry. Mr. McNamee is a member of the
Board of Directors of the New York Stock Exchange, the New York State Science
and Technology Foundation, and the New York Conservation Education Fund. Mr.
McNamee received his Bachelor of Arts degree from Yale University.
Dr. Walter L. Robb has served as a member of the Board of Directors of Plug
Power since June 1997. He has been a member of the Board of Directors of
Mechanical Technology since January, 1997. Since 1993, Dr. Robb has served as
President of Vantage Management, Inc., a management consulting firm. Prior to
1993, Dr. Robb served as the Senior Vice President for Corporate Research and
Development at General Electric Company. In that capacity, Dr. Robb directed
the GE R & D Center, one of the world's largest and most diversified industrial
laboratories, and served on General Electric's Corporate Executive Council. He
serves on the Board of Directors of Cree Research, Inc., a developer and
manufacturer of semiconductor materials and electronic devices, Celgene
Corporation, a specialty pharmaceutical company engaged in the development and
commercialization of human pharmaceuticals, and Neopath, Inc., a developer and
marketer of visual intelligence technology designed to increase accuracy in
medical testing.
Robert L. Nardelli has been nominated and has agreed to serve as a member of
the Board of Directors effective upon the offering. Since 1995, Mr. Nardelli
has served as President and Chief Executive Officer of GE Power Systems, a $7.5
billion division of General Electric Company headquartered in Schenectady, New
York and is a Senior Vice President of General Electric Company and a member of
the Board of Directors of GE Capital Corporation. Previously, Mr. Nardelli
served from 1992 to 1995 as President and Chief Executive Officer of GE
Transportation Systems. From 1991 to 1992, Mr. Nardelli served as President and
Chief Executive Officer of CAMCO, Inc., General Electric's Canadian appliance
manufacturing company, and from 1988 to 1991, he served as an Executive Vice
President and General Manager at Case Corporation, a designer, manufacturer
47
<PAGE>
and distributor of farm and construction equipment. Mr. Nardelli received a
Bachelor of Science degree in business from Western Illinois University and a
Master of Business Administration degree from the University of Louisville.
John M. Shalikashvili (U.S. Army-ret.) has been nominated and has agreed to
serve as a member of the Board of Directors effective upon the offering.
General Shalikashvili was the senior officer of the United States military and
principal military advisor to the President of the United States, the Secretary
of Defense and National Security Council by serving as the thirteenth Chairman
of the Joint Chiefs of Staff, Department of Defense, for two terms from 1993 to
1997. Prior to his tenure as Chairman of the Joint Chiefs of Staff, he served
as the Commander in Chief of all United States forces in Europe and as NATO's
tenth Supreme Allied Commander, Europe. He has also served in a variety of
command and staff positions in the continental United States, Alaska, Belgium,
Germany, Italy, Korea, Turkey and Vietnam. General Shalikashvili is currently a
director of L-3 Communications Holdings, Inc., a manufacturer of communications
and related equipment, and United Defense Industries, Inc., a privately held
manufacturer of military track equipment and naval armament. General
Shalikashvili received a Bachelor of Science degree in Mechanical Engineering
from Bradley University and a Master of Arts degree in International Affairs
from George Washington University, and is a graduate of the Naval Command and
Staff College and the United States Army War College.
Dr. Glenn A. Eisman has served as Chief Technology Officer since November
1998. In that capacity, Dr. Eisman manages the development of fuel cell
membranes and electrodes and other related technology. From June 1998 to
November 1998, Dr. Eisman served as our Director of Technology. From 1984 to
June 1998, Dr. Eisman held various technical positions at The Dow Chemical
Company where, from 1984 to 1989, he directed and conducted research pertaining
to all aspects of PEM fuel cell development efforts, including polymer
materials science, catalysts, coatings technology and electrochemical
techniques. From 1980 to 1983, Dr. Eisman was the Robert A. Welch Research
Fellow in Materials Science and Engineering at the University of Texas-Austin.
Dr. Eisman received a Bachelor of Science in Chemistry degree from Temple
University and a Ph.D. in Physical Inorganic Chemistry from Northeastern
University.
Dr. William D. Ernst has served as Vice President and Chief Scientist since
June 1997. In that capacity, Dr. Ernst is responsible for advancing our
scientific, competitive and intellectual property position within the fuel cell
industry and serves as Principal Investigator for government-sponsored
programs. From 1989 to June 1997, Dr. Ernst held various positions at
Mechanical Technology Incorporated, including Program Director for its
automotive fuel cell development program and Manager of Power Systems, in which
capacity he initiated their fuel cell development program and directed all fuel
cell programs and technical development activities. Dr. Ernst received a Master
of Science in Engineering degree from the Massachusetts Institute of Technology
and a Ph.D. in Aeronautical Engineering from Rensselaer Polytechnic Institute.
Russel H. Marvin has served as Vice President of Component Engineering and
Design since November 1998. In that capacity Mr. Marvin manages Plug Power's
design for manufacturing efforts to bring the residential product to market.
From January 1998 to November 1998, Mr. Marvin served as our Vice President of
Engineering and Manufacturing. From 1994 to January 1998, Mr. Marvin served as
the Director of Engineering for two different divisions of Axiohm Transaction
Solutions, Inc., a manufacturer and marketer of transaction printers. Mr.
Marvin served from 1991 to 1994 as a Project Leader for Eastman Kodak Co.'s
Clinical Products Division, a maker of blood analysers, and from 1989 to 1991
as a Senior Mechanical Engineer for NCR Corp.'s printer division. Mr. Marvin
received a Bachelor of Science degree from Clarkson University and a Master of
Science degree from Rensselaer Polytechnic Institute.
48
<PAGE>
Ana-Maria Galeano has served as General Counsel and Corporate Secretary since
April 1998. In that capacity, Ms. Galeano advises the company on legal issues
in such areas as corporate law, contracts, strategic alliances and intellectual
property. From September 1993 to April 1998, Ms. Galeano served as an attorney
at the law firm of Whiteman, Osterman & Hanna in Albany, New York, where she
participated in the formation of Plug Power. Ms. Galeano received a Bachelor of
Arts degree from the State University of New York at Binghamton and a Juris
Doctorate from Brooklyn Law School.
Board Composition
Effective upon the closing of this offering, the number of our directors will
be fixed at nine. Initially we will have eight directors, with the one vacancy
to be filled with an independent director selected by the Board of Directors.
Effective upon the offering, Messrs. Nardelli and Shalikashvili, each a
director-nominee, will be elected to our Board of Directors for an initial term
of three years. Pursuant to our amended distribution agreement with GE Fuel
Cell Systems, we have agreed to nominate Mr. Nardelli, or another designee of
GE Power Systems, for election to the Board of Directors during the term of the
agreement. Our Board of Directors will be divided into three classes, each of
whose members will serve for a staggered three-year term. Our Board of
Directors will consist of three Class I directors, Messrs. Mittleman, Robb and
Earley, whose term of office will continue until the 2000 annual meeting of
stockholders, three Class II directors, Messrs. McNamee, Cudahy and the
independent director to be selected following the offering, whose term of
office will continue until the 2001 annual meeting of stockholders, and three
Class III directors, Messrs. Garberding, Nardelli and Shalikashvili, whose term
of office will continue until the 2002 annual meeting of stockholders. At each
annual meeting of stockholders, a class of directors will be elected for a
three-year term to succeed the directors of the same class whose terms are then
expiring. Vacancies on our Board of Directors may be filled solely by the Board
of Directors.
There are no family relationships among any of our directors or executive
officers.
Board Committees
Effective upon the closing of this offering, our Board of Directors will
establish an Audit Committee and a Compensation Committee. The members of the
Audit Committee, which will include Mr. Cudahy, an independent director, and
one of the independent directors to be selected after the offering, will be
responsible for recommending to the Board of Directors the engagement of our
outside auditors and reviewing our accounting controls and the results and
scope of audits and other services provided by our auditors. The Compensation
Committee, which will be made up of Messrs. McNamee and Earley, will be
responsible for reviewing and recommending to the Board of Directors the amount
and type of non-stock compensation to be paid to senior management and
establishing and reviewing general policies relating to compensation and
benefits of employees. The administration of our stock option plan will be
conducted by the entire Board of Directors.
Director Compensation
Directors who are employees receive no additional compensation for their
services as directors. Non-employee directors receive cash compensation of
$1,000 for each Board meeting attended in person and $500 for each Board
meeting attended by telephone. Non-employee directors are eligible to
participate in our 1999 Stock Option and Incentive Plan at the discretion of
the full Board of Directors. In accordance with a policy approved by our Board
of Directors, upon initial election or appointment to the Board of Directors,
new non-employee directors will receive non-qualified stock options to purchase
15,000 shares (50,000 shares for any new non-employee Chairman) of common stock
which will be fully vested upon grant. Each year of a non-employee director's
tenure, the
49
<PAGE>
director will receive non-qualified options to purchase 10,000 shares (20,000
shares for any non-employee Chairman), plus non-qualified options to purchase
an additional 5,000 shares for a non-employee director serving as chairman of
the Audit Committee and non-qualified options to purchase an additional 2,000
shares for a non-employee director serving as chairman of any other committee,
including the Compensation Committee. These annual options will fully vest on
the first anniversary of the date of grant. In accordance with this policy,
upon the effectiveness of the registration statement of which this prospectus
is a part, (i) Messrs. Cudahy, Earley, Garberding, Robb, Nardelli and
Shalikashvili will receive non-qualified options to purchase 25,000 shares of
common stock at the initial public offering price with 15,000 shares vested
upon grant and 10,000 shares vesting on the date of our 2000 annual meeting of
stockholders, and (ii) Mr. McNamee will receive non-qualified options to
purchase 70,000 shares of common stock at the initial public offering price
with 50,000 shares vested upon grant and 20,000 shares vesting on the date of
our 2000 annual meeting of stockholders. During 1998, options to purchase an
aggregate of 20,000 shares were granted to Messrs. McNamee and Robb as
compensation for their services as directors.
Executive Compensation
The following table sets forth the total compensation paid in the year ended
December 31, 1998 to Messrs. Mittleman, Acker and Dhar, who were the only Plug
Power executive officers whose aggregate compensation exceeded $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
-------------
Number
of Securities
Annual Compensation Underlying All
--------------------- Options Other
Name Salary($) Bonus($) Granted(#) Compensation(1)
- ---- ---------- --------- ------------- ---------------
<S> <C> <C> <C> <C>
Gary Mittleman.............. $ 152,885 $ 45,000 100,000 $6,115
President and Chief
Executive Officer
Dr. William P. Acker........ 112,316 -- 55,000 2,877
Vice President of
Product Development
and Commercialization
Dr. Manmohan Dhar........... 103,269 -- 30,000 2,692
Vice President and Chief
Engineer of the Residential
Program
</TABLE>
- --------
(1) Amounts shown in this column represent the dollar value of matching
contributions made by Plug Power under our 401(k) Savings and Retirement
Plan.
50
<PAGE>
Option Grants In Last Fiscal Year
The following table sets forth information regarding stock options granted
during 1998 to our executive officers listed in the Summary Compensation Table.
During 1998, we granted options to purchase an aggregate of 597,650 shares of
common stock to employees. The exercise price per share for these options was
equal to the fair market value of the common stock as of the grant date as
determined by the Board of Directors.
Option Grants In Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of
Number of Percent of Total Stock Price
Securities Options Appreciation
Name Underlying Granted to Exercise for Option Term(2)
- ---- Options Employees in Price Expiration ---------------------
Granted(1) Fiscal Year ($/Share) Date 5%($) 10%($)
---------- ---------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gary Mittleman.......... 100,000 16.7% $5.00 7/16/08 $ 314,447 $ 796,871
Dr. William P. Acker.... 55,000 9.2% 1.00 2/27/08 34,589 87,656
Dr. Manmohan Dhar....... 20,000 3.3% 1.00 2/27/08 12,578 31,875
10,000 1.7% 1.00 6/29/08 6,289 15,937
</TABLE>
- --------
(1) All options were granted under our 1997 stock option plan and have a ten
year term. Of the options shown in this table, 20% vest after completion
of 12 months of continuous employment service and an additional 20% vest
at each 12 month anniversary over the four year period following the date
of grant. Vested options become immediately exercisable upon a sale of the
company or an initial public offering; otherwise, all vested options
become exercisable on July 1, 2000.
(2) Potential realizable value is based on the assumption that our common
stock appreciates at the annual rate shown, compounded annually, from the
date of grant until expiration of the ten-year term. These numbers are
calculated based on Securities and Exchange Commission requirements and do
not reflect our projection or estimate of future stock price growth.
Potential realizable values are computed by multiplying the number of
shares of common stock subject to a given option by the fair market value
on the date of grant, as determined by our Board of Directors, assuming
that the aggregate stock value derived from that calculation compounds at
the annual 5% or 10% rate shown in the table for the entire ten-year term
of the option and subtracting from that result the aggregate option
exercise price. At an assumed initial public offering price of $14.00 per
share, the potential realizable value at the assumed annual rates of stock
price appreciation will be higher than the values shown above. Mr.
Mittleman's options to purchase 100,000 shares of common stock will have a
potential realizable value of $1,780,452 and $3,131,239 at assumed annual
rates of stock price appreciation of 5% and 10%, respectively. Dr. Acker's
options to purchase 55,000 shares of common stock will have a potential
realizable value of $1,199,249 and $1,942,182 at assumed annual rates of
stock price appreciation of 5% and 10%, respectively. Dr. Dhar's options
to purchase 20,000 shares of common stock will have a potential realizable
value of $436,090 and $706,248 at assumed annual rates of stock price
appreciation of 5% and 10%, respectively. Dr. Dhar's options to purchase
10,000 shares of common stock will have a potential realizable value of
$218,045 and $353,124 at assumed annual rates of stock price appreciation
of 5% and 10%, respectively.
Fiscal Year-End Option Values
The following table sets forth information concerning the number and value of
unexercised options to purchase common stock held as of December 31, 1998 by
our executive officers listed in the Summary Compensation Table. There was no
public trading market for our common stock as of December 31, 1998.
Accordingly, the values of the unexercised in-the-money options have been
calculated on the basis of an assumed initial public offering price of $14.00
per share less the applicable exercise price multiplied by the number of shares
that may be acquired on exercise. None of the executive officers listed in the
Summary Compensation Table exercised any stock options in 1998.
51
<PAGE>
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal Year- In-The-Money Options
End (#) at Fiscal Year-End (1)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Gary Mittleman.............. -- 600,000 -- $7,400,000
Dr. William P. Acker........ -- 90,000 -- 1,170,000
Dr. Manmohan Dhar........... -- 50,000 -- 650,000
</TABLE>
- --------
(1) There was no public market for the common stock on December 31, 1998. The
value of exercisable and unexercisable in-the-money options at December 31,
1998 has been calculated using an assumed initial public offering price of
$14.00 per share.
Stock Option Plans
Effective July 1, 1997, we established a stock option plan to provide
employees, consultants, and members of the Board the ability to acquire an
ownership interest in Plug Power. Options for employees generally vest 20% per
year and expire ten years after issuance. Options granted to members of the
Board vest 50% upon grant and 25% per year thereafter. Options granted to
consultants vest one-third on the expiration of the consultant's initial
contract term, with an additional one-third vesting on each anniversary
thereafter. At September 30, 1999, there were a total of 3,377,189 options
granted under this plan. Although no further options will be granted under this
plan, the options previously granted will continue to vest in accordance with
this plan and vested options will be exercisable for shares of common stock
upon completion of the offering.
Our Board of Directors and stockholders have adopted the 1999 Stock Option
and Incentive Plan, which allows for the issuance of up to 2,561,002 shares of
common stock and other awards. The number of shares of common stock available
for issuance under our plan will be increased by the amount of any forfeitures
under the 1999 Stock Option and Incentive Plan and under the 1997 Stock Option
Plan. The number of shares of common stock under our plan will further increase
January 1 and July 1 of each year by an amount equal to 16.4% of any net
increase in the total number of shares of stock outstanding. This offering will
result in an increase of 984,000 shares of stock available for issuance under
our plan. The 1999 Stock Option and Incentive Plan permits us to:
. grant incentive stock options;
. grant non-qualified stock options;
. grant stock appreciation rights;
. issue or sell common stock with vesting or other restrictions, or
without restrictions;
. grant rights to receive common stock in the future with or without
vesting;
. grant common stock upon the attainment of specified performance goals;
and
. grant dividend rights in respect of common stock.
These grants may be made to officers, employees, non-employee directors,
consultants, advisors and other key persons of Plug Power.
The 1999 Stock Option and Incentive Plan will be administered by our Board of
Directors or by a committee designated by our Board of Directors consisting
solely of two or more independent directors. Subject to the provisions of the
plan, the Board or the committee may select the individuals eligible to receive
awards, determine or modify the terms and conditions of the awards granted,
accelerate the vesting schedule of any award and generally administer and
interpret the plan.
The exercise price of options granted under the 1999 Stock Option and
Incentive Plan is determined by the Board or committee. Under present law,
incentive stock options and options
52
<PAGE>
intended to qualify as performance-based compensation under Section 162(m) of
the Internal Revenue Code of 1986 may not be granted at an exercise price less
than the fair market value of the common stock on the date of grant, or less
than 110% of the fair market value in the case of incentive stock options
granted to optionees holding more than 10% of the voting power. Non-qualified
stock options may be granted at prices which are no less than 85% of the fair
market value of the underlying shares on the date granted. Options are
typically subject to vesting schedules, terminate ten years from the date of
grant, may be exercised for specified periods after the termination of the
optionee's employment or other service relationship with us, and are generally
non-transferable. Upon the exercise of options, the option exercise price must
be paid in full:
. in cash or by certified or bank check or other instrument acceptable to
the committee;
. in the sole discretion of the committee, by delivery of shares of common
stock that have been owned by the optionee free of restrictions for at
least six months;
. by promissory note if the loan of these funds to the optionee has been
authorized by the Board of Directors and the optionee pays so much of
the exercise price as represents the par value of the common stock
acquired in a form other than a promissory note; and
. by a broker under irrevocable instructions to the broker selling the
underlying shares from the optionee.
Upon certain events, including a merger, reorganization or consolidation, the
sale of all or substantially all of our assets or all of our outstanding
capital stock or a liquidation or other similar transaction, all outstanding
awards issued under the 1999 Stock Option and Incentive Plan will become fully
vested and exercisable upon the closing of the transaction. The 1999 Stock
Option and Incentive Plan and all awards issued under the plan will terminate
upon any of the transactions described above, unless Plug Power and the other
parties to such transactions have agreed otherwise. All participants under the
1999 Stock Option and Incentive Plan will be permitted, for a period of time to
be determined by the committee, to exercise before any termination all awards
held by them which are then exercisable or will become exercisable upon the
closing of the transaction.
1999 Employee Stock Purchase Plan
We have adopted the Plug Power 1999 Employee Stock Purchase Plan under which
employees will be eligible to purchase shares of our common stock at a discount
through periodic payroll deductions. The plan is intended to meet the
requirements of Section 423 of the Internal Revenue Code. After the initial
period, purchases will occur at the end of six month offering periods at a
purchase price equal to 85% of the market value of our common stock at either
the beginning of the offering period or the end of the offering period,
whichever is lower. The first offering period under the plan will begin on
January 1, 2000 and will end on April 30, 2000. Participants may elect to have
from 1% to 10% of their pay withheld for purchase of common stock at the end of
the offering period, up to a maximum of $12,500 within any offering period. We
have reserved 1,000,000 shares of common stock for issuance under this plan.
Employment Agreements
We have entered into the following agreements with our senior management:
Gary Mittleman, our President and Chief Executive Officer, will receive 100%
of his base salary, continuation of employee benefits and vesting of stock
options for twelve months if we terminate his employment for any reason other
than failure to perform, gross negligence and/or fraud. For 1999, Mr.
Mittleman's base salary is $205,000.
Dr. Manmohan Dhar, our Vice President and Chief Engineer of the Residential
Program, will receive 100% of his base pay for twelve months if he voluntarily
terminates his employment or if we terminate his employment for any reason
other than gross misconduct, negligence, theft, dishonesty, or fraud.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mechanical Technology Incorporated and Edison Development Corporation formed
Plug Power in June 1997. In exchange for 4,750,000 shares of common stock each
in Plug Power, Mechanical Technology contributed to Plug Power $4.75 million of
in-process research and development and other assets and Edison Development
contributed $4.75 million in cash.
In June 1997, Plug Power and Edison Development Corporation entered into a
distribution agreement which provides Edison Development with the exclusive
right to distribute fuel cell systems of 2 kilowatts and higher to end-users
for stationary applications in the states of Illinois, Indiana, Michigan and
Ohio. The agreement expires in January 2010. In exchange for commitments to
purchase pre-commercial fuel cell systems and meet minimum sales obligations
during commercial production, we agreed to amend the distribution agreement to
permit Edison Development to, among other things, sell fuel cell systems to
resellers.
In June 1997, we granted to Edison Development options to purchase 200,000
shares of common stock at an exercise price of $1.00 per share. In June 1998,
we granted Edison Development an additional option to purchase 30,000 shares of
common stock at an exercise price of $5.00 per share.
On June 27, 1997, we entered into a management services agreement with
Mechanical Technology to obtain services relating to the management of Plug
Power and lease office space for a period of one year. The management services
agreement terminated in June 1998. At the expiration of this agreement, we
extended the existing facilities lease through September 30, 1998. In June
1998, we entered into a new facilities lease with Mechanical Technology which
commenced on October 1, 1998, and had a term of ten years with an option to
extend for an additional five years. We paid rent to Mechanical Technology of
$79,000 for the period from June 27, 1997 to December 31, 1997, $378,000 for
the year ended December 31, 1998, and $215,000 for the six months ended June
30, 1999. As part of the new facilities lease, Mechanical Technology reimbursed
Plug Power $2.0 million for improvements made to the facilities.
Our limited liability company agreement gave us the right to call upon Edison
Development for additional contributions up to an aggregate of $4.25 million
beginning on June 27, 1998, subject to achieving defined milestones relating to
technology development and system production, and gave Mechanical Technology
the right to match the contribution within a stated period to preserve its
percentage ownership in Plug Power. We made such calls on Edison Development in
April 1998 for $2.25 million and in June 1998 for $2.0 million, and Mechanical
Technology matched these contributions by making in-kind contributions to us of
a below-market lease valued at $2.0 million and research (non cash) credits
valued at $2.25 million, as described below. In exchange for such contributions
we issued 4,250,000 shares of our common stock to each of Mechanical Technology
and Edison Development.
In April 1998, Mechanical Technology purchased 2,000,000 shares of Plug Power
common stock in exchange for a below-market lease for office and manufacturing
facilities valued at $2.0 million. In April and June 1998, Mechanical
Technology paid $191,250 for two one-year options which entitled Mechanical
Technology to acquire a total of 2,250,000 shares of Plug Power at a price of
$1.00 per share. In March 1999, we agreed that Mechanical Technology had earned
research (non-cash) credits valued at $2.25 million which were used by
Mechanical Technology to exercise their option to acquire the 2,250,000 shares,
and the $191,250 was returned to Mechanical Technology in accordance with the
terms of the option agreements. The research credits were earned by Mechanical
Technology by assisting Plug Power in obtaining government grants and research
contracts.
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After receiving these $4.25 million contributions from Mechanical Technology
and Edison Development, the limited liability company agreement required us to
seek additional financing from Mechanical Technology and Edison Development,
allowing them to maintain their ownership percentage, before seeking financing
from new investors. In accordance with the agreement, in August 1998 we offered
Mechanical Technology and Edison Development the opportunity to contribute
additional funds. Mechanical Technology and Edison Development each committed
to contribute an additional $5.0 million to Plug Power.
Pursuant to this committment, in August 1998 Mechanical Technology purchased
200,000 shares of Plug Power common stock at a price of $5.00 per share in
exchange for a contribution to capital of a $500,000 short-term loan and
accounts receivable (totaling $500,000) owed by Plug Power to Mechanical
Technology for management services under our management services agreement and
rent. Between October 1998 and February 1999, Mechanical Technology purchased
800,000 additional shares of Plug Power at a price of $5.00 per share for $4.0
million in cash pursuant to its $5.0 million commitment. To match these
contributions, in August 1998 Edison Development purchased 200,000 shares of
Plug Power common stock at a price of $5.00 per share in exchange for a
contribution to capital of two $500,000 short-term loans. Between October 1998
and February 1999, Edison Development purchased 800,000 shares of Plug Power
common stock at a price of $5.00 per share for $4.0 million in cash.
In January 1999, we entered into an agreement with Mechanical Technology and
Edison Development, pursuant to which we have the right to call upon Edison
Development and Mechanical Technology to contribute $7.5 million each in 1999
and $15.0 million each in 2000 in exchange for which each will receive common
stock valued at $7.50 per share. The agreement terminates on the earlier of
December 31, 2000 or upon an initial public offering of our shares at a price
greater than $7.50 per share. An amendment to the agreement permits Mechanical
Technology and Edison Development to contribute any funds not previously called
by us on the termination date in exchange for shares at a price of $7.50 per
share. Mechanical Technology and Edison Development committed to contribute
$22.5 million each in exchange for an aggregate of 6,000,000 shares of common
stock prior to the closing of this offering. In September 1999 Mechanical
Technology and Edison Development contributed $2.0 million each pursuant to
these agreements. Accordingly, Mechanical Technology and Edison Development
will each contribute $20.5 million immediately before this offering.
In June 1999, we entered into an agreement with Mechanical Technology to
acquire its 36 acre office facilities in Latham, New York, including all land
and buildings, in exchange for 704,315 shares of Plug Power common stock valued
at $6.67 per share or a total of $4.7 million and the assumption of
approximately $6.2 million in debt. In accordance with the terms of our limited
liability company agreement, Edison Development purchased 704,315 shares of
Plug Power common stock at $6.67 per share for $4.7 million in cash.
After giving effect to the offering and the additional investments
contemplated, Mechanical Technology will beneficially own approximately 32.5%
of Plug Power's outstanding common stock. FAC/Equities, a co-manager of this
offering, is a division of First Albany Corporation, whose parent, First Albany
Companies, Inc., owns approximately 34.0% of the outstanding common stock of
Mechanical Technology. George C. McNamee, the Chairman and Co-Chief Executive
Officer of First Albany Companies, the Chairman and Co-Chief Executive Officer
of First Albany Corporation and the Chief Executive Officer and a director of
Mechanical Technology, is currently the Chairman of the Board of Directors of
Plug Power and will be the Chairman of the Board of Directors of Plug Power
upon completion of the offering. In addition, Dr. Walter L. Robb, a director of
Mechanical Technology, is a director of Plug Power and will be a director of
Plug Power upon completion of this offering.
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After giving effect to the offering, Edison Development will beneficially own
approximately 32.8% of Plug Power's outstanding common stock. Anthony F.
Earley, Jr., the Chairman, Chief Executive Officer, President and Chief
Operating Officer of DTE Energy Company and its subsidiary, The Detroit Edison
Company, is a director of Plug Power and will be a director of Plug Power upon
completion of the offering. Detroit Edison is the parent company of Edison
Development. In addition, Larry G. Garberding, a director of DTE Energy and the
Executive Vice President and Chief Financial Officer of DTE Energy and Detroit
Edison, is also director of Plug Power and will be a director of Plug Power
upon completion of the offering.
In February 1999, we granted a warrant to Mr. Michael Cudahy, a director of
Plug Power, to purchase up to 400,000 shares of common stock at an exercise
price of $8.50 per share and sold Mr. Cudahy 1,440,000 shares of common stock
for a purchase price of $9,600,000. Mr. Cudahy committed to exercise his
warrant to purchase 400,000 shares before the closing of this offering for a
total purchase price of $3,400,000.
In February 1999, we also entered into an agreement with GE On-Site Power to
create GE Fuel Cell Systems, a joint venture owned 75% by GE On-Site Power and
25% by Plug Power, which is dedicated to marketing, selling, installing, and
servicing Plug Power residential fuel cell systems on a worldwide basis (other
than in the states of Illinois, Indiana, Michigan and Ohio). In connection with
the formation of GE Fuel Cell Systems we issued 2,250,000 shares of our common
stock to GE On-Site Power, of which 750,000 shares vested immediately. We have
capitalized the fair value of these shares ($11.3 million) under the caption
"Investment in Affiliate" in the financial statements. Before this agreement
was amended, as described below, the remaining 1,500,000 shares were to vest
ratably over the next four years.
We also issued a warrant to GE On-Site Power to purchase 3,000,000 additional
shares of common stock at a price of $12.50 per share. GE On-Site Power has
committed to exercise this warrant immediately before the closing of this
offering for a total exercise price of $37.5 million in cash.
In February 1999 we entered into an agreement with General Electric pursuant
to which General Electric agreed to provide capital to GE Fuel Cell Systems, in
the form of loans, to fund GE Fuel Cell Systems' commitment to purchase 485
pre-commercial systems during the period ending December 31, 2000. General
Electric also agreed to provide additional capital, in the form of a loan not
to exceed $8.0 million, to fund GE Fuel Cell Systems' ongoing operations. In
addition, the agreement provides that, as long as we are providing PEM fuel
cell systems that are competitive, as determined by GE On-Site Power, in good
faith, based on objective factors set forth in the joint venture agreement, GE
Power Systems may not sell PEM fuel cell systems that compete with our fuel
cell systems. If GE On-Site Power determines that our fuel cell systems are not
competitive, we have 12 months to make them competitive before the noncompete
provision terminates. Divisions or subsidiaries of General Electric Company
other than GE Power Systems are not prohibited from selling competing fuel cell
systems but, in the event that they do, we can terminate our agreements with GE
Fuel Cell Systems or appoint additional distributors.
In August 1999, we amended our agreement with GE On-Site Power to vest all
remaining shares. In addition, we have agreed to purchase $12.0 million of
technical support services from General Electric during the next three years
and extended the term of the distribution agreement by 5 years to 2009. We also
agreed with GE On-Site Power to use our best efforts to cause one individual
nominated by GE Power Systems to be elected to our Board of Directors for as
long as our distribution agreement with GE Fuel Cell Systems remains in effect.
Robert L. Nardelli, President and Chief Executive Officer of GE On-Site Power,
will be elected to our Board of Directors as a Class III Director effective
upon this offering, with an initial term expiring in 2002.
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As of September 30, 1999, we had granted options to purchase 3,377,189 shares
of common stock under our 1997 stock option plan to our officers, directors,
employees, consultants and advisors. We have reserved for issuance up to
2,561,002 additional options under our 1999 stock option plan and 1,000,000
shares of common stock for issuance under our 1999 employee stock purchase plan
under which employees will be eligible to purchase shares of common stock at a
discount through periodic payroll deductions.
We have granted GE On-Site Power the right, on one occasion at any time after
the second anniversary of this offering, to require us to register up to
3,000,000 shares of our common stock under the Securities Act. In addition,
upon the closing of this offering, we will grant all of our eight current
stockholders the right to include their shares of common stock in any of the
first three registration statements we may file under the Securities Act.
Plug Power has agreed to purchase power conditioners from Satcon Technology
Corporation for our residential fuel cell systems. Mechanical Technology owns
16% of Satcon's outstanding stock on a fully diluted basis and has the right to
appoint two members to Satcon's board of directors.
We believe that each of the transactions described above was entered into on
terms no less favorable to Plug Power than could be obtained with non-
affiliated parties. For all future transactions, we have adopted a conflict of
interest policy whereby all material transactions between Plug Power and our
officers, directors and other affiliates must (i) be approved by a majority of
the members of the Board of Directors, including a majority of the
disinterested members and (ii) be on terms no less favorable to us than could
be obtained from unaffiliated third parties. In addition, any loans to our
officers, directors and other affiliates must be for bona fide business
purposes only.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial ownership
of our common stock on a pro forma basis to reflect the issuance of shares to
current stockholders immediately prior to the closing of this offering and on a
pro forma, as adjusted basis to reflect the sale of the common stock offered
hereby, by:
. all persons known by us to own beneficially 5% or more of the common
stock;
. each of our directors;
. the executive officers listed in the Summary Compensation Table; and
. all directors and executive officers as a group.
Unless otherwise indicated, each of the stockholders has sole voting and
investment power with respect to the shares of common stock beneficially owned
by the stockholder. The address of Mechanical Technology Incorporated is 968
Albany-Shaker Road, Latham, NY 12110. The address of Edison Development
Corporation is c/o DTE Energy Company, 2000 Second Avenue, 644 WCB, Detroit,
Michigan 48226. The address of GE On-Site Power, Inc. is c/o GE Power Systems,
One River Road, Schenectady, New York 12345. The address of Michael Cudahy is
10850 West Park Place, Suite 980, Milwaukee, Wisconsin 53224. The address of
all other listed stockholders is c/o Plug Power Inc., 968 Albany-Shaker Road,
Latham, New York 12110.
The number of shares beneficially owned by each stockholder is determined
under rules issued by the Securities and Exchange Commission and includes
voting or investment power with respect to securities. Under these rules,
beneficial ownership includes any shares as to which the individual or entity
has sole or shared voting power or investment power and includes any shares as
to which the individual or entity has the right to acquire beneficial ownership
within 60 days after September 30, 1999 through the exercise of any warrant,
stock option or other right. The inclusion in this prospectus of such shares,
however, does not constitute an admission that the named stockholder is a
direct or indirect beneficial owner of such shares. The number of shares of
common stock outstanding used in calculating the percentage for each listed
person includes the shares of common stock underlying options held by such
person that are exercisable within 60 days of September 30, 1999, but excludes
shares of common stock underlying options held by any other person. Percentage
of beneficial ownership is based on 36,208,480 shares of common stock
outstanding as of September 30, 1999 on a pro forma basis.
<TABLE>
<CAPTION>
Shares Beneficially Owned
-------------------------------------------
Prior to the Offering After the Offering
-------------------------------------------
Name of Beneficial Owners Number Percent Number Percent
------------------------- ------------- --------------------- -------
<S> <C> <C> <C> <C>
DTE Energy Company(1).......... 13,926,815 38.2% 13,926,815 32.8%
Mechanical Technology
Incorporated(2)............... 13,704,315 37.8 13,704,315 32.5
General Electric Company(3).... 5,250,000 14.5 5,250,000 12.4
Michael J. Cudahy(4)........... 1,840,000 5.1 1,840,000 4.4
Gary Mittleman(5).............. 380,000 1.0 380,000 *
Dr. William P. Acker(5)........ 57,000 * 57,000 *
Dr. Manmohan Dhar(5)........... 49,000 * 49,000 *
Anthony F. Earley, Jr.(6) ..... 13,926,815 38.2 13,926,815 32.8
Larry G. Garberding(6)......... 13,926,815 38.2 13,926,815 32.8
George C. McNamee(7)........... 13,811,815 38.0 13,811,815 32.6
Dr. Walter L. Robb(5).......... 57,500 * 57,500 *
Robert L. Nardelli(8).......... 5,250,000 14.5 5,250,000 12.4
John M. Shalikashvili.......... -- -- -- --
All executive officers,
directors, and director-
nominees as a group (13
persons)(9)................... 35,372,130 95.4 35,372,130 82.1
</TABLE>
- --------
* Represents less than 1% of the outstanding shares of common stock
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(1) Includes 13,926,815 shares owned of record by Edison Development
Corporation, an indirect wholly-owned subsidiary of DTE Energy Company, of
which 2,733,333 are shares of common stock that will be acquired upon the
exercise of certain purchase rights immediately prior to the closing of
this offering and 222,500 are shares of common stock that are issuable
upon the exercise of outstanding options that are exercisable within 60
days of September 30, 1999.
(2) Includes 2,733,333 shares of common stock to be acquired upon the exercise
of certain purchase rights immediately before the closing of this
offering.
(3) Includes 5,250,000 shares of common stock owned of record by GE On-Site
Power, Inc., an indirect wholly-owned subsidiary of General Electric that
operates within its GE Power Systems business, of which 3,000,000 are
shares of common stock that will be acquired upon the exercise of a
warrant immediately before the closing of this offering.
(4) Includes 400,000 shares of common stock to be acquired upon the exercise
of a warrant immediately before the closing of this offering.
(5) All shares shown represent shares of common stock issuable upon exercise
of outstanding options that are exercisable within 60 days of September
30, 1999.
(6) Includes 13,926,815 shares owned of record by Edison Development
Corporation, an indirect wholly-owned subsidiary of DTE Energy Company, of
which 2,733,333 are shares of common stock that will be acquired upon the
exercise of certain purchase rights immediately before the closing of this
offering and 222,500 are shares of common stock that are issuable upon the
exercise of outstanding options that are exercisable within 60 days of
September 30, 1999. Messrs. Earley and Garberding, who are directors and
executive officers of DTE Energy, may be deemed the beneficial owners of
these shares. Each of Messrs. Early and Garberding disclaim beneficial
ownership of these shares.
(7) Includes 13,704,315 shares of common stock owned of record by Mechanical
Technology, of which 2,733,333 are shares of common stock to be acquired
upon the exercise of certain purchase rights in connection with the
closing of this offering. Mr. McNamee, a director and Chief Executive
Officer of Mechanical Technology, may be deemed the beneficial owner of
these shares. Mr. McNamee disclaims beneficial ownership of these shares.
Also includes 107,500 shares of common stock issuable upon exercise of
outstanding options held by Mr. McNamee that are exercisable within 60
days of September 30, 1999.
(8) Includes 5,250,000 shares of common stock owned of record by GE On-Site
Power, Inc., an indirect wholly-owned subsidiary of General Electric that
operates within its GE Power Systems business, of which 3,000,000 are
shares of common stock that will be acquired upon the exercise of a
warrant immediately before the closing of this offering. Mr. Nardelli, a
Senior Vice President of General Electric and the President and Chief
Executive Officer of GE Power Systems, disclaims beneficial ownership of
these shares.
(9) Includes 873,500 shares of common stock issuable upon exercise of
outstanding options held by the executive officers, directors and director-
nominees as a group that are exercisable within 60 days of September 30,
1999.
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DESCRIPTION OF CAPITAL STOCK
Authorized and Outstanding Capital Stock
As of September 30, 1999 there were 36,208,480 shares of common stock issued
and outstanding after giving effect to the issuance of 9,216,666 shares of
common stock upon the exercise of purchase rights and warrants by current
stockholders immediately before this offering. Following the offering, our
authorized capital stock will consist of 95,000,000 shares of common stock, of
which 42,208,480 will be issued and outstanding, and 5,000,000 shares of
undesignated preferred stock issuable in one or more series designated by our
Board of Directors, of which no shares will be issued and outstanding. In
addition, as of September 30, 1999, there were outstanding stock options to
purchase 3,377,189 shares of common stock. Of the issued and outstanding common
stock, 111,851 shares are subject to forfeiture by the holder. At September 30,
1999, there were eight holders of record of our common stock.
Common Stock
Voting Rights
The holders of our common stock have one vote per share. Holders of our
common stock are not entitled to vote cumulatively for the election of
directors. Generally, all matters to be voted on by stockholders must be
approved by a majority, or, in the case of election of directors, by a
plurality, of the votes entitled to be cast at a meeting at which a quorum is
present by all shares of common stock present in person or represented by
proxy, voting together as a single class, subject to any voting rights granted
to holders of any then outstanding preferred stock.
Dividends
Holders of common stock will share ratably in any dividends declared by our
Board of Directors, subject to the preferential rights of any preferred stock
then outstanding. Dividends consisting of shares of common stock may be paid to
holders of shares of common stock.
Other Rights
On liquidation, dissolution or winding up of Plug Power, all holders of
common stock are entitled to share ratably in any assets available for
distribution to holders of shares of common stock. No shares of common stock
are subject to redemption or have preemptive rights to purchase additional
shares of common stock.
Preferred Stock
Our certificate of incorporation provides that shares of preferred stock may
be issued from time to time in one or more series. Our Board of Directors is
authorized to fix the voting rights, if any, designations, powers, preferences,
qualifications, limitations and restrictions thereof, applicable to the shares
of each series. Our Board of Directors may, without stockholder approval, issue
preferred stock with voting and other rights that could adversely affect the
voting power and other rights of the holders of the common stock and could have
anti-takeover effects. We have no present plans to issue any shares of
preferred stock. The ability of our Board of Directors to issue preferred stock
without stockholder approval could have the effect of delaying, deferring or
preventing a change of control of Plug Power or the removal of existing
management.
Indemnification Matters
Our certificate of incorporation contains a provision permitted by Delaware
law that generally eliminates the personal liability of directors for monetary
damages for breaches of their fiduciary duty,
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including breaches involving negligence or gross negligence in business
combinations, unless the director has breached his or her duty of loyalty,
failed to act in good faith, engaged in intentional misconduct or a knowing
violation of law, paid a dividend or approved a stock repurchase in violation
of the Delaware General Corporation Law or obtained an improper personal
benefit. This provision does not alter a director's liability under the federal
securities laws and does not affect the availability of equitable remedies,
such as an injunction or rescission, for breach of fiduciary duty. Our by-laws
provide that directors and officers shall be, and in the discretion of our
board of directors, non-officer employees may be, indemnified by Plug Power to
the fullest extent authorized by Delaware law, as it now exists or may in the
future be amended, against all expenses and liabilities reasonably incurred in
connection with service for or on behalf of Plug Power. Our by-laws also
provide that the right of directors and officers to indemnification shall be a
contract right and shall not be exclusive of any other right now possessed or
hereafter acquired under any by-law, agreement, vote of stockholders or
otherwise. We also have directors' and officers' insurance against certain
liabilities.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Plug Power as
described above, we have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable. At present, there is no
pending material litigation or proceeding involving any director, officer,
employee or agent of Plug Power in which indemnification will be required or
permitted.
Provisions of Certificate of Incorporation and By-laws which may have Anti-
takeover Effect
A number of provisions of our certificate of incorporation and by-laws which
will be effective upon completion of this offering concern matters of corporate
governance and the rights of stockholders. These provisions, as well as the
ability of our Board of Directors to issue shares of preferred stock and to set
the voting rights, preferences and other terms, may be deemed to have an anti-
takeover effect and may discourage takeover attempts not first approved by our
Board of Directors, including takeovers which stockholders may deem to be in
their best interests. If takeover attempts are discouraged, temporary
fluctuations in the market price of our common stock, which may result from
actual or rumored takeover attempts, may be inhibited. These provisions,
together with our classified Board of Directors and the ability of our Board of
Directors to issue preferred stock without further stockholder action, also
could delay or frustrate the removal of incumbent directors or the assumption
of control by stockholders, even if the removal or assumption would be
beneficial to our stockholders. These provisions also could discourage or make
more difficult a merger, tender offer or proxy contest, even if favorable to
the interests of stockholders, and could depress the market price of our common
stock. Our Board of Directors believes that these provisions are appropriate to
protect the interests of Plug Power and of our stockholders. Our Board of
Directors has no present plans to adopt any further measures or devices which
may be deemed to have an "anti-takeover effect."
No Stockholder Action by Written Consent
Our certificate of incorporation provides that any action required or
permitted to be taken by our stockholders at an annual or special meeting of
stockholders must be effected at a duly called meeting and may not be taken or
effected by a written consent of stockholders.
Meetings of Stockholders
Our certificate of incorporation and by-laws provide that a special meeting
of stockholders may be called only by the Chairman, if any, the President, the
Chief Executive Officer or our Board of Directors unless otherwise required by
law. Our by-laws provide that only those matters included in the notice of the
special meeting may be considered or acted upon at that special meeting unless
otherwise provided by law. In addition, our by-laws include advance notice and
informational
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requirements and time limitations on any director nomination or any new
proposal which a stockholder wishes to make at an annual meeting of
stockholders.
Director Vacancies and Removal
Our certificate of incorporation and by-laws provide that vacancies in our
Board of Directors may be filled only by the affirmative vote of a majority of
the remaining directors. Our certificate of incorporation provides that
directors may be removed from office only with cause and only by the
affirmative vote of holders of at least two-thirds of the shares then entitled
to vote at an election of directors.
Ability to Adopt Stockholder Rights Plan
Our Board of Directors may in the future resolve to issue shares of preferred
stock or rights to acquire such shares in order to implement a stockholder
rights plan. A stockholder rights plan typically creates voting or other
impediments to discourage persons seeking to gain control of Plug Power by
means of a merger, tender offer, proxy contest or otherwise if our Board of
Directors determines that such change in control is not in the best interests
of Plug Power and our stockholders. Our Board of Directors has no present
intention of adopting a stockholder rights plan and is not aware of any attempt
to effect a change in control of Plug Power.
Amendment of the Certificate of Incorporation
Any amendment to our certificate of incorporation must first be approved by a
majority of our Board of Directors and, if required by law, thereafter approved
by a majority of the outstanding shares entitled to vote with respect to such
amendment, except that any amendment to the provisions relating to stockholder
action, directors, limitation of liability and the amendment of our certificate
of incorporation must be approved by a super-majority of the outstanding shares
entitled to vote with respect to such amendment.
Amendment of By-laws
Our certificate of incorporation and by-laws provide that our by-laws may be
amended or repealed by our Board of Directors or by the stockholders. Such
action by the Board of Directors requires the affirmative vote of a majority of
the directors then in office. Such action by the stockholders requires the
affirmative vote of at least two-thirds of the shares present in person or
represented by proxy at an annual meeting of stockholders or a special meeting
called for such purpose unless our Board of Directors recommends that the
stockholders approve such amendment or repeal at such meeting, in which case
such amendment or repeal shall only require the affirmative vote of a majority
of the shares present in person or represented by proxy at the meeting.
Statutory Business Combination Provision
Following the offering, we will be subject to Section 203 of the Delaware
General Corporation Law, which prohibits a publicly-held Delaware corporation
from consummating a "business combination," except under certain circumstances,
with an "interested stockholder" for a period of three years after the date
such person became an "interested stockholder" unless:
. before such person became an interested stockholder, the board of
directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved the
business combination;
. upon the closing of the transaction that resulted in the interested
stockholder's becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding shares held
by directors who are also officers of the corporation and shares held by
employee stock plans; or
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. following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders
by the affirmative vote of the holders of 66 2/3% of the outstanding
voting stock of the corporation not owned by the interested stockholder.
The term "interested stockholder" generally is defined as a person who,
together with affiliates and associates, owns, or, within the prior three
years, owned, 15% or more of a corporation's outstanding voting stock. The term
"business combination" includes mergers, asset sales and other similar
transactions resulting in a financial benefit to an interested stockholder.
Section 203 makes it more difficult for an "interested stockholder" to effect
various business combinations with a corporation for a three-year period. A
Delaware corporation may "opt out" of Section 203 with an express provision in
its original certificate of incorporation or an express provision in its
certificate of incorporation or by-laws resulting from an amendment approved by
holders of a least a majority of the outstanding voting stock. Neither our
certificate of incorporation nor our by-laws contains any such exclusion.
Trading on the Nasdaq National Market System
We have applied to have our common stock approved for quotation on the Nasdaq
National Market under the symbol "PLUG".
Transfer Agent and Registrar
The transfer agent and registrar for our common stock will be the American
Stock Transfer & Trust Company.
63
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for our common stock,
and no prediction can be made as to the effect, if any, that sales of common
stock or the availability of common stock for sale will have on the market
price of our common stock prevailing from time to time. Nonetheless,
substantial sales of common stock in the public market following this offering,
or the perception that sales could occur, could lower the market price of our
common stock or make it difficult for us to raise additional equity capital in
the future.
Following this offering, there will be 42,208,480 shares of our common stock
outstanding on a fully diluted basis. Of these shares, the 6,000,000 shares
which are being sold in this offering generally will be freely transferable
without restriction or further registration under the Securities Act, except
that any shares held by our "affiliates" as is defined in Rule 144 under the
Securities Act may be sold only in compliance with the limitations described
below.
The remaining 36,208,480 shares of common stock which will be outstanding
after the offering will be "restricted securities" as defined in Rule 144, and
may be sold in the future without registration under the Securities Act subject
to compliance with the provisions of Rule 144 or any other applicable exemption
under the Securities Act.
In connection with this offering, our existing officers, directors, and
stockholders, who hold all of the currently outstanding shares of common stock
and will own an aggregate of 36,208,480 shares of common stock after this
offering, have agreed with the underwriters that, subject to exceptions, they
will not sell or dispose of any of their shares for 180 days after the date of
this prospectus. Goldman, Sachs & Co. may, in its sole discretion and at any
time without notice, release all or any portion of the shares subject to such
restrictions. Subject to these lock-up agreements, the shares of common stock
outstanding upon the closing of the offering will be available for sale in the
public market as follows:
<TABLE>
<CAPTION>
Approximate
Number of Shares Description
---------------- ------------------------------------------------------------
<C> <S>
After the date of this prospectus, freely tradeable shares
6,000,000 sold in the offering.
25,049,850 After 180 days from the date of this prospectus, the lock-up
period will expire and these shares will be saleable under
Rule 144 (subject, in some cases, to volume limitations).
</TABLE>
In general, under Rule 144 as currently in effect, assuming we are current in
our public filings with the Securities Exchange Commission, a person or persons
whose shares are required to be aggregated, including an affiliate of ours, and
who has beneficially owned shares for at least one year is entitled to sell
through a brokers transaction or in a transaction directly with a market maker,
within any three-month period commencing 90 days after the date of this
prospectus, a number of shares that does not exceed the greater of 1% of the
then outstanding shares of common stock, which is expected to be 422,085 shares
upon the completion of this offering, or the average weekly trading volume of
the common stock during the four calendar weeks preceding the date on which
notice of such sale is filed, subject to certain restrictions. In addition, a
person who is not deemed to have been an affiliate of ours at any time during
the 90 days preceding a sale and who has beneficially owned the shares proposed
to be sold for at least two years would be entitled to sell such shares under
Rule 144(k) without regard to the requirements described above. To the extent
that shares were acquired from an affiliate of ours, such person's holding
period for the purpose of effecting a sale under Rule 144 commences on the date
of transfer from the affiliate.
We have agreed not to sell or otherwise dispose of any shares of common stock
during the 180-day period following the date of this prospectus, except we may
issue, and grant options to purchase, shares of common stock under the 1999
stock option plan and our employee stock purchase plan.
64
<PAGE>
We have granted GE On-Site Power the right, on one occasion at any time after
the second anniversary of this offering, to require us to register up to
3,000,000 shares of our common stock under the Securities Act. In addition,
upon the closing of this offering, we will grant all of our eight current
stockholders the right to include their shares of common stock in any of the
first three registration statements we may file under the Securities Act.
We intend to file a registration statement on Form S-8 with respect to the
aggregate of shares of common stock issuable under our stock option plans and
our employee stock purchase plan promptly following the consummation of this
offering. Shares issued upon the exercise of stock options after the effective
date of the Form S-8 resgistration statement will be eligible for resale in the
public market without restriction, subject to Rule 144 limitations applicable
to affiliates and the lock-up agreements described above.
VALIDITY OF COMMON STOCK
The validity of the shares of common stock offered hereby will be passed upon
for Plug Power by Goodwin, Procter & Hoar LLP, Boston, Massachusetts. Various
legal matters related to the sale of the common stock offered hereby will be
passed upon for the underwriters by Ropes & Gray, Boston, Massachusetts.
EXPERTS
The financial statements as of December 31, 1997 and 1998, the period from
June 27, 1997 (date of inception) to December 31, 1997, and for the year ended
December 31, 1998, included in this prospectus have been so included in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 (including the exhibits and schedules thereto) under the
Securities Act and the rules and regulations thereunder, for the registration
of the common stock offered hereby. This prospectus is part of the registration
statement. This prospectus does not contain all the information included in the
registration statement because we have omitted certain parts of the
registration statement as permitted by the Securities and Exchange Commission's
rules and regulations. For further information about us and our common stock,
you should refer to the registration statement. Statements contained in this
prospectus as to any contract, agreement or other document referred to are not
necessarily complete. Where the contract or other document is an exhibit to the
registration statement, each statement is qualified by the provisions of that
exhibit.
You can inspect and copy all or any portion of the registration statements or
any reports, statements or other information we file at the public reference
facility maintained by the Securities and Exchange Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional offices
at Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You may call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information
about the operation of the public reference rooms. Copies of all or any portion
of the registration statement can be obtained from the Public Reference Section
of the Securities and Exchange Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. In addition, the registration statement is
publicly available through the Securities and Exchange Commission's site on the
Internet's World Wide Web, located at http://www.sec.gov.
65
<PAGE>
We will also file annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission. You can also
request copies of these documents, for a copying fee, by writing to the
Securities and Exchange Commission. We intend to furnish to our stockholders
annual reports containing audited financial statements for each fiscal year.
66
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of independent accountants......................................... F-2
Balance sheets as of December 31, 1997 and 1998 and June 30, 1999
(unaudited).............................................................. F-3
Statements of operations for the period from June 27, 1997 (date of
inception) to December 31, 1997, the year ended December 31, 1998, the
six months ended June 30, 1998 (unaudited), the six months ended June 30,
1999 (unaudited), and cumulative amounts from inception (unaudited)...... F-4
Statements of stockholders' equity for the period from June 27, 1997 (date
of inception) to December 31, 1997, the year ended December 31, 1998 and
the six months ended June 30, 1999 (unaudited)........................... F-5
Statements of cash flows for the period from June 27, 1997 (date of
inception) to December 31, 1997, the year ended December 31, 1998, the
six months ended June 30, 1998 (unaudited), the six months ended June 30,
1999, and cumulative amounts from inception (unaudited).................. F-6
Notes to financial statements............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Members and Holders of Membership Interests
In our opinion, the accompanying balance sheets and the related statements of
operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of Plug Power, LLC (a development
stage enterprise), at December 31, 1997 and 1998, and the results of its
operations and its cash flows for the period from June 27, 1997 (date of
inception) to December 31, 1997, and for the year ended December 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Albany, New York
April 9, 1999
F-2
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
Balance Sheets
<TABLE>
<CAPTION>
December 31, December 31, June 30,
1997 1998 1999
------------ ------------ -----------
(Unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents, principally
commercial paper..................... $3,080,181 $ 3,993,122 $17,242,734
Accounts receivable................... 803,557 599,955 1,016,402
Other current assets.................. 33,550 14,647 81,614
Due from investor..................... -- 685,306 --
---------- ----------- -----------
Total current assets................ 3,917,288 5,293,030 18,340,750
Property, plant and equipment, net...... 737,613 2,753,492 8,142,513
Investment in affiliate................. -- -- 10,749,552
Other assets............................ 191,665 46,913 --
---------- ----------- -----------
Total assets........................ $4,846,566 $ 8,093,435 $37,232,815
========== =========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable...................... $ 434,795 $ 568,007 $ 3,233,998
Accrued expenses...................... 797,864 1,746,239 1,439,454
Due to investor....................... 17,247 286,492 7,610
Current portion of capital lease
obligation........................... -- -- 90,173
---------- ----------- -----------
Total current liabilities........... 1,249,906 2,600,738 4,771,235
Capital lease obligation.............. -- -- 155,397
---------- ----------- -----------
Total liabilities................... 1,249,906 2,600,738 4,926,632
---------- ----------- -----------
Commitments and contingencies
Stockholders' equity:
Class A membership interest; no par
value, authorized 18,000,000,
25,000,000 and 40,000,000 in 1997,
1998 and 1999, respectively; issued
and outstanding; 9,500,000,
17,150,000 and 26,458,480 in 1997,
1998 and 1999, respectively.......... -- -- --
Class B membership interests; no par
value, authorized 3,000,000, none
issued............................... -- -- --
Paid-in capital....................... 9,500,000 21,012,000 67,607,964
Class A membership interests
subscribed........................... -- -- (4,697,782)
Deficit accumulated during the
development stage.................... (5,903,340) (15,519,303) (30,603,999)
---------- ----------- -----------
Total stockholders' equity.......... 3,596,660 5,492,697 32,306,183
---------- ----------- -----------
Total liabilities and stockholders'
equity............................. $4,846,566 $ 8,093,435 $37,232,815
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
Statements of Operations
For the period from June 27, 1997 (date of inception) to December 31, 1997,
the year ended December 31, 1998, the six months ended June 30, 1998,
the six months ended June 30, 1999, and cumulative amounts from inception
<TABLE>
<CAPTION>
Cumulative
December 31, December 31, June 30, June 30, Amounts from
1997 1998 1998 1999 Inception
------------ ------------ ----------- ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Contract revenue........ $ 1,193,530 $ 6,541,040 $ 2,548,653 $ 3,695,535 $ 11,430,105
Cost of contract
revenue................ 1,226,443 8,863,845 3,438,301 5,117,834 15,208,122
----------- ----------- ----------- ------------ ------------
Loss on contracts....... (32,913) (2,322,805) (889,648) (1,422,299) (3,778,017)
In-process research and
development............ 4,042,640 -- -- -- 4,042,640
Research and development
expense................ 1,300,877 4,632,729 2,153,775 7,780,246 13,713,852
General and
administrative
expense................ 630,033 2,753,645 1,328,256 6,068,486 9,452,164
----------- ----------- ----------- ------------ ------------
Operating loss......... (6,006,463) (9,709,179) (4,371,679) (15,271,031) (30,986,673)
Other income,
principally interest... 103,123 93,216 41,472 218,033 414,372
----------- ----------- ----------- ------------ ------------
Loss before equity in
losses of affiliate... (5,903,340) (9,615,963) (4,330,207) (15,052,998) (30,572,301)
Equity in losses of
affiliate.............. -- -- -- (31,698) (31,698)
----------- ----------- ----------- ------------ ------------
Net loss............... $(5,903,340) $(9,615,963) $(4,330,207) $(15,084,696) $(30,603,999)
=========== =========== =========== ============ ============
Loss per membership
interest:
Basic and diluted...... $ (0.62) $ (0.71) $ (0.40) $ (0.71)
=========== =========== =========== ============
Weighted average number
of membership interests
outstanding:........... 9,500,000 13,616,986 10,864,641 21,299,034
=========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
Statements of Stockholders' Equity
For the period from June 27, 1997 (date of inception) to December 31, 1997,
the year ended December 31, 1998, and the six months ended June 30, 1999
(unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Class A Additional Membership During the Total
Membership Paid-in Interests Development Stockholders'
Interests Capital Subscribed Stage Equity
---------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance, June 27, 1997.. -- $ -- $ -- $ -- $ --
Capital contributions... 9,500,000 9,500,000 9,500,000
Net loss................ (5,903,340) (5,903,340)
---------- ----------- ----------- ------------ -----------
Balance, December 31,
1997................... 9,500,000 9,500,000 (5,903,340) 3,596,660
Capital contributions... 7,650,000 13,250,000 13,250,000
Deferred rent expense... (2,000,000) (2,000,000)
Amortization of deferred
rent expense........... 50,000 50,000
Compensatory options.... 212,000 212,000
Net loss................ (9,615,963) (9,615,963)
---------- ----------- ----------- ------------ -----------
Balance, December 31,
1998................... 17,150,000 21,012,000 (15,519,303) 5,492,697
Capital contributions... 4,808,480 31,065,564 (4,697,782) 26,367,782
Shares issued for equity
in affiliate........... 2,250,000 11,250,000 11,250,000
Stock based
compensation........... 2,250,000 2,250,000 2,250,000
Amortization of deferred
rent expense........... 100,000 100,000
Write-off deferred rent
expense................ 1,850,000 1,850,000
Compensatory options.... 80,400 80,400
Net loss................ (15,084,696) (15,084,696)
---------- ----------- ----------- ------------ -----------
Balance, June 30, 1999.. 26,458,480 $67,607,964 $(4,697,782) $(30,603,999) $32,306,183
========== =========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
Statements of Cash Flows
For the period from June 27, 1997 (date of inception) to December 31, 1997,
the year ended December 31, 1998, the six months ended June 30, 1998,
the six months ended June 30, 1999 and cumulative amounts from inception
<TABLE>
<CAPTION>
Cumulative
December 31, December 31, June 30, June 30, Amounts from
1997 1998 1998 1999 Inception
------------ ------------ ----------- ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating
Activities:
Net loss........................ $(5,903,340) $(9,615,963) $(4,330,207) $(15,084,696) $(30,603,999)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization.. 187,708 499,142 187,673 692,967 1,379,817
In-process research and
development................... 4,042,640 -- -- -- 4,042,640
Equity in losses of affiliate.. -- -- -- 31,698 31,698
Amortization of deferred rent.. -- 50,000 -- 100,000 150,000
Write-off of deferred rent..... -- -- -- 1,850,000 1,850,000
In-kind services............... -- 500,000 -- -- 500,000
Stock based compensation....... -- -- -- 2,406,250 2,406,250
Compensatory options........... -- 212,000 106,000 80,400 292,400
Increases (decreases) in
operating assets:
Accounts receivable............ (803,557) 203,602 (267,915) (416,447) (1,016,402)
Other current assets........... (33,550) 18,903 (26,703) (66,967) (81,614)
Change in due from/due to
investor...................... 17,247 (416,061) (367,759) 406,424 7,610
Accounts payable and accrued
expenses...................... 1,184,551 1,081,587 1,066,239 2,359,206 4,625,344
Other assets................... -- -- -- 21,914 21,914
----------- ----------- ----------- ------------ ------------
Net cash used in operating
activities................... (1,308,301) (7,466,790) (3,632,672) (7,619,251) (16,394,342)
----------- ----------- ----------- ------------ ------------
Cash Flows From Investing
Activities:
Purchase of property, plant and
equipment...................... (361,518) (2,370,269) (1,876,440) (5,498,919) (8,230,706)
----------- ----------- ----------- ------------ ------------
Cash used in investing
activities................... (361,518) (2,370,269) (1,876,440) (5,498,919) (8,230,706)
----------- ----------- ----------- ------------ ------------
Cash Flows From Financing
Activities:
Contributed capital............. 4,750,000 10,750,000 4,250,000 26,367,782 41,867,782
----------- ----------- ----------- ------------ ------------
Cash provided by financing
activities................... 4,750,000 10,750,000 4,250,000 26,367,782 41,867,782
----------- ----------- ----------- ------------ ------------
Increase (decrease) in cash...... 3,080,181 912,941 (1,259,112) 13,249,612 17,242,734
Cash and cash equivalents,
beginning....................... -- 3,080,181 3,080,181 3,993,122 --
----------- ----------- ----------- ------------ ------------
Cash and cash equivalents,
ending.......................... $ 3,080,181 $ 3,993,122 $ 1,821,069 $ 17,242,734 $ 17,242,734
=========== =========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 and 1999 amounts are unaudited
1. Nature of Operations
Plug Power, LLC (Company), was formed as a joint venture between Edison
Development Corporation (EDC) and Mechanical Technology Incorporated (MTI) on
June 27, 1997. The Company is a development stage enterprise formed to
research, develop, manufacture and distribute fuel cells for electric power
generation.
The unaudited interim financial statements reflect all adjustments which are,
in the opinion of management, necessary for a fair statement of the results for
the interim periods presented.
2. Significant Accounting Policies
Use of estimates:
The financial statements of the Company have been prepared in conformity with
generally accepted accounting principles which require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents:
Cash and cash equivalents include cash on hand and short term investments
with original maturities of three months or less.
Inventories:
Inventories are stated at lower of cost (first-in, first-out) or market.
Property, plant and equipment, and long-lived assets:
Property, plant and equipment are stated at cost and are depreciated using
the straight-line method over their estimated useful lives ranging from 2 to 10
years.
The Company reviews long-lived assets and identifiable intangible assets for
impairment whenever any events or changes in circumstances indicate that the
carrying amount of these assets may not be recoverable.
Revenue recognition:
The Company's contract revenue is derived from revenues earned under
contracts principally with government agencies. Such contracts require the
Company to deliver research and tangible developments in fuel cell technology
and system design and prototype fuel cell systems for test and evaluation by
the government agency. Revenues are recognized in proportion to the costs
incurred. Total estimated cost to complete a contract in excess of the awarded
contract amounts are charged to operations during the period such costs are
estimated. While the Company's accounting for these contract costs are subject
to audit by the sponsoring agency, in the opinion of management, no material
adjustments are expected as a result of such audits.
The Company generally is required to absorb from 25% to 50% of the total
costs incurred on government contracts. At June 30, 1999 the Company has been
awarded approximately $40 million of such government contracts.
F-7
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
2. Significant Accounting Policies, continued
At December 31, 1998 and at June 30, 1999, $25,688 of retainage was owed to
the Company and is included in accounts receivable.
Recent Accounting Pronouncements:
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosure about Segments of an
Enterprise and Related Information"(SFAS 131). SFAS 131 establishes new
standards for the way companies report information about operating segments in
annual financial statements. The disclosures prescribed by SFAS 131 are
effective for the year ended December 31, 1998. We do not believe we operate in
more than one segment.
3. Inventories
Inventories at December 31, 1997 and 1998, and June 30, 1999 consist of
unbilled work-in-progress on research contracts of $20,911 and $14,647, and
$53,087 respectively, and are included in other current assets.
4. Property, Plant and Equipment
Property, plant and equipment at December 31, 1997 and 1998 and June 30, 1999
consisted of the following:
<TABLE>
<CAPTION>
December 31, December 31
1997 1998 June 30, 1999
------------ ----------- -------------
<S> <C> <C> <C>
Leasehold improvements.. $ 36,778 $ 97,889 $ 97,889
Machinery and
equipment.............. 817,643 3,104,887 5,562,223
Construction in
progress............... 3,287,153
--------- ---------- ----------
854,421 3,202,776 8,947,265
Less accumulated
depreciation........... (116,808) (449,284) (804,752)
--------- ---------- ----------
Property, plant and
equipment, net......... $ 737,613 $2,753,492 $8,142,513
========= ========== ==========
</TABLE>
Depreciation and amortization expense was approximately $29,375 for the
period from June 27, 1997 (date of inception) to December 31, 1997, $332,476
for the year ended December 31, 1998, and $104,340 and $355,468 for the six
months ended June 30, 1998 and 1999, respectively.
As of June 30, 1999, the Company has committed to approximately $4 million of
additional capital expenditures. The Company also leased equipment under a
capital lease transaction subsequent to December 31, 1998 with a net book value
at June 30, 1999 of $248,110 which is included in machinery and equipment.
Future minimum non-cancelable lease payments are as follows:
<TABLE>
<CAPTION>
1999.............................................................. $ 58,921
<S> <C>
2000.............................................................. 93,022
2001.............................................................. 93,022
2002.............................................................. 34,068
2003.............................................................. 5,368
---------
284,401
Less amounts representing interest................................ (38,831)
---------
$ 245,570
=========
</TABLE>
F-8
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
5. Loss Per Membership Interest
Loss per membership interest for the Company is as follows:
<TABLE>
<CAPTION>
June 27, 1997 Six months
to Year ended ended Six months
December 31, December 31, June 30, ended
1997 1998 1998 June 30, 1999
------------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Numerator:
Net loss............... $(5,903,340) $(9,615,963) $(4,330,207) $(15,084,696)
Denominator:
Weighted average
membership interests
outstanding........... 9,500,000 13,616,986 10,864,661 21,299,034
</TABLE>
No options, warrants, or contingently issuable membership interests were
included in the calculation of diluted loss per membership interest because
their impact would have been anti-dilutive.
6. Income Taxes
The Company's income taxes or credits resulting from earnings or losses were
payable by, or accrued to, its members. Therefore, no provision has been made
for income taxes in these financial statements.
7. Stockholders' Equity
The Company has two classes of membership interests, Class A voting and Class
B non voting interests. All Class B membership interests will be converted to
Class A membership interests on the earlier of (1) the date on which the
Company (or its successor) files a registration statement for the public sale
of interests in the Company (or shares of a successor), under the Securities
Act of 1933; or (2) approval by a majority of the Class A membership interests,
of (a) a sale, lease, assignment, transfer or other conveyance of all or
substantially all of the assets of the Company, or (b) a merger, combination or
dissolution of the Company. At December 31, 1998 and June 30, 1999, 3,000,000
Class B membership interests were reserved for issuance under the membership
option plan. At June 30, 1999, 9,750,000 Class A membership interests are
reserved for warrant exercises and capital calls. Subsequent to June 30, 1999,
an additional 1,300,000 Class B membership interests were authorized for
issuance, for a total of 4,300,000.
In exchange for EDC's initial cash contribution of $4,750,000, the Company
issued 4,750,000 Class A membership interests in the Company. MTI made noncash
contributions of $4,750,000 consisting of in-process research and development
($4,042,640), and certain net assets, in exchange for 4,750,000 Class A
membership interests. The amount allocated to the in-process research and
development contributed to the Company by MTI represents its estimated fair
value based on the negotiations of two parties and is consistent with its value
under the cost valuation approach. Under the cost valuation approach, value is
measured by quantifying the cost of replacing the future service capability of
the acquired property without considering the amount of economic benefits that
can be achieved, or the time period over which they might continue.
Contributed in-process research and development was early development stage
property, which did not and currently does not have commercial viability or any
alternative future use and which will require substantial additional
expenditures to commercialize. Accordingly, the assigned value was charged to
operations at the time the Company was formed.
F-9
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
7. Stockholders' Equity, continued
During the year ended December 31, 1998, EDC and MTI made additional total
contributions of $13,250,000 in exchange for 7,650,000 Class A membership
interests. EDC contributed $7,750,000 in cash for 4,950,000 Class A membership
interests. MTI contributed $3,000,000 in cash, $2,000,000 of deferred rent
related to a below market lease for office and manufacturing facilities, and
$500,000 of in-kind services ($5,500,000 in total) for 2,700,000 Class A
membership interests. In 1998, MTI purchased options for $191,250, which
entitled MTI to acquire 2,250,000 Class A membership interests by June, 1999
for $2,250,000.
According to the joint venture agreement, MTI may earn non-cash credits which
will be applied toward the purchase price of Class A membership interests under
option. MTI can earn these credits based on the Company obtaining certain
defined levels of research contracts. In March 1999, all parties to the
agreement mutually agreed that MTI had earned $2,250,000 of non-cash credit
which were used to acquire 2,250,000 Class A membership interests.
Accordingly, these interests were issued in March 1999, a charge to
operations of $2,250,000 was recorded under the caption "General and
Administrative Expense," and $191,250 was returned to MTI in accordance with
the terms of the option agreement.
A summary of equity transactions from inception through June 30, 1999 is as
follows:
<TABLE>
<CAPTION>
Membership
Number of Price per Total Paid Interests
Date Shares Share Cash Non-cash in Capital Subscribed
---- ---------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
June, 1997................... 4,750,000 $1.00 $ 4,750,000 $ $ 4,750,000 $
June, 1997................... 4,750,000 1.00 4,750,000 4,750,000
---------- ----------- ----------- ----------- -----------
December 31, 1997............ 9,500,000 4,750,000 4,750,000 9,500,000
April and June, 1998......... 4,250,000 1.00 4,250,000 4,250,000
June, 1998................... 2,000,000 1.00 2,000,000 2,000,000
August, 1998................. 300,000 5.00 1,500,000 1,500,000
August, 1998................. 100,000 5.00 500,000 500,000
October, November, and
December, 1998.............. 1,000,000 5.00 5,000,000 5,000,000
---------- ----------- ----------- ----------- -----------
Capital contributions, 1998 7,650,000 10,750,000 2,500,000 13,250,000
Deferred rent expense........ (2,000,000) (2,000,000)
Amortization of deferred rent
expense..................... 50,000 50,000
Compensatory options......... 212,000 212,000
---------- ----------- ----------- ----------- -----------
December 31, 1998............ 17,150,000 15,500,000 5,512,000 21,012,000
January and February, 1999... 600,000 5.00 3,000,000 3,000,000
February, 1999............... 1,500,000 6.67 10,000,000 10,000,000
April and June, 1999(a)...... 2,004,165 6.67 13,367,782 13,367,782
June, 1999................... 704,315 6.67 4,697,782 4,697,782 (4,697,782)
---------- ----------- ----------- ----------- -----------
Capital contributions,
1999...................... 4,808,480 26,367,782 4,697,782 31,065,564 (4,697,782)
Share issued for equity in
affiliate, February, 1999... 2,250,000 5.00 11,250,000 11,250,000
Stock based compensation,
March 1999(b)............... 2,250,000 1.00 2,250,000 2,250,000
Amortization of deferred rent
expense..................... 100,000 100,000
Write-off deferred rent
expense..................... 1,850,000 1,850,000
Compensatory options......... 80,400 80,400
---------- ----------- ----------- ----------- -----------
June 30, 1999................ 26,458,480 $41,867,782 $25,740,182 $67,607,964 $(4,697,782)
========== =========== =========== =========== ===========
</TABLE>
- --------
(a) Excludes $840,000 of in-kind marketing services not yet provided.
(b) Represents exercise of April, 1998 option.
F-10
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
8. Related Party Transactions
On June 27, 1997, the Company entered into a distribution agreement with the
EDC. Under the agreement, EDC was appointed the Company's exclusive independent
distributor in Michigan, Ohio, Indiana and Illinois to promote and assist in
the sale of products developed by the Company, subject to certain terms and
conditions.
On June 27, 1997, the Company entered into a management services agreement
with MTI to obtain certain services and lease certain facilities for a period
of one year. At the expiration of this agreement, the Company extended the
existing facilities lease through September 30, 1998. In June 1998, the Company
entered into a new facilities lease which commenced on October 1, 1998, and had
a term of ten years with an option for an additional five years. Rental expense
was $79,000 for the period from June 27, 1997 (date of inception) to December
31, 1997, and $378,000 for the year ended December 31, 1998. Rental expense was
$256,000 and $215,000 for the six months ended June 30, 1998 and 1999,
respectively. The total amount due MTI was $17,247, $286,492 and $7,610 at
December 31, 1997, December 31, 1998 and June 30, 1999, respectively.
As part of the new facilities lease, MTI agreed to reimburse the Company up
to $2.0 million for improvements made to the Company's facilities. At December
31, 1998, $685,306 in Company expenditures had not yet been reimbursed by MTI,
and is included in due from investor. Subsequent to June 30, 1999, the lease
and the management agreement with MTI were terminated in connection with MTI's
contribution of its real estate to the Company in exchange for Class A
membership interests (see Note 10).
9. Employee Benefit Plans
Membership Option Plan:
Effective July 1, 1997, the Company established a Membership Option Plan (the
Plan) to provide employees an option to purchase Class B membership interests.
Employee options generally vest 20% per year and expire ten years after
issuance. Options granted to the Board of Managers vest 50% upon grant and 25%
per year thereafter. Options granted to consultants vest one-third on
expiration of the consultant's initial contract term with an additional one-
third vesting on each anniversary thereafter. Except as discussed below, no
options can be exercised prior to July 1, 2000. All options granted shall
become immediately vested and exercisable in the event of the sale of all or
substantially all of the Company's assets, or in the event of the sale of all
or substantially all of the Company's Class A Membership interests. All vested
options shall become immediately exercisable in the event the Company's Class A
membership interests become publicly traded. At June 30, 1999, there are
3,000,000 interests authorized for issuance under the Plan. Subsequent to June
30, 1999, an additional 1,300,000 interests were authorized for issuance, for a
total of 4,300,000.
The following table summarizes information about the membership options
outstanding under the Plan at December 31, 1998:
<TABLE>
<CAPTION>
Outstanding
---------------------------- ---
Average Weighted
Remaining Average
Life Exercise
Exercise Price Interests (Years) Price
-------------- --------- --------- --------
<S> <C> <C> <C> <C>
$ 1.00...................................... 1,435,200 8.9 $1.00
$ 5.00...................................... 240,000 9.8 5.00
--------- --- -----
1,675,200 9.1 1.57
--------- --- -----
</TABLE>
F-11
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
9. Employee Benefit Plans, continued
The following table summarizes information about the membership options
outstanding under the Plan at June 30, 1999:
<TABLE>
<CAPTION>
Outstanding
----------------------------
Average Weighted
Remaining Average
Life Exercise
Exercise Price Interests (Years) Price
-------------- --------- --------- --------
<S> <C> <C> <C>
$ 1.00.......................................... 1,435,200 8.4 $1.00
$ 5.00.......................................... 583,039 9.6 5.00
$ 6.67.......................................... 591,500 10.0 6.67
---------
2,609,739 9.0 3.18
=========
</TABLE>
The following table summarizes activity of the Plan:
<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Interests Price
Under Per
Option Activity Option Interest
--------------- --------- --------
<S> <C> <C>
Balance, June 27, 1997................................... -- $--
Granted at fair value.................................... 1,132,500 1.00
Forfeited or terminated.................................. (18,500) 1.00
---------
Balance December 31, 1997................................ 1,114,000 1.00
Granted below fair value................................. 197,000 1.00
Granted at fair value.................................... 460,650 3.09
Forfeited or terminated.................................. (96,450) 1.03
---------
Balance December 31, 1998................................ 1,675,200 1.57
---------
Granted at fair value.................................... 934,539 6.06
---------
Balance at June 30, 1999................................. 2,609,739 3.12
=========
</TABLE>
Accounting for Stock Based Compensation:
The per share weighted average fair value of the options granted during 1997,
1998 and 1999 was $0.26, $0.58 and $1.45, respectively, using the minimum value
method of valuing stock options under Statement of Financial Accounting
Standard No. 123 (SFAS No.123) "Accounting for Stock-Based Compensation".
The dividend yield was assumed to be $0 for all periods. The risk free
interest rate ranged from 5.8% to 6.1% in 1997 and 4.5% to 5.6% in 1998, and
5.1% to 5.7% in 1999. An expected life of five years was assumed. The Company
applies Accounting Principles Board Opinion No. 25 in accounting for the Plan
and does not record compensation cost for options granted at fair value.
During 1998 the Company awarded 197,000 options to key employees for which
issuance was contingent upon the attainment of specified performance
objectives. Of those awarded, 51,500 were forfeited. The difference between the
fair value of the membership interests at the measurement date and the exercise
price of the options was $582,000, and will be charged to expense over the four
F-12
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
9. Employee Benefit Plans, continued
year vesting period of the options. The charge to operations was $212,000 and
$80,400 for the year ended December 31, 1998 and for the six months ended June
30, 1999, respectively.
Had the Company determined compensation cost based on fair value in
accordance with SFAS 123, the Company's net loss would have increased to the
pro forma amounts indicated below:
<TABLE>
<CAPTION>
Six months
June 27, 1997 Year ended ended
to December 31, December 31, June 30,
1997 1998 1999
--------------- ------------ -------------
<S> <C> <C> <C>
Net loss, as reported............. $ (5,903,340) $ (9,615,963) $ (15,084,696)
Proforma net loss................. (6,000,628) (9,775,441) (15,197,507)
Proforma loss per membership in-
terest, basic and
diluted.......................... $ (0.63) $ (0.72) $ (0.71)
</TABLE>
401(k) Savings & Retirement Plan:
The Company offers a 401(k) Savings & Retirement Plan to eligible employees
meeting certain age and service requirements. This plan permits participants
to contribute up to 15% of their salary, up to the maximum allowable by the
Internal Revenue Service regulations. Participants are immediately vested in
their voluntary contributions plus actual earnings thereon. Participants are
vested in the Company's matching contribution based on the years of service
completed. Participants are fully vested upon completion of four years of
service. The Company's expense for this plan was $23,000 for the period from
June 27, 1997 (date of inception) to December 31, 1997 and $95,000 for the
year ended December 31, 1998. The Company's expense for this plan was $34,000
and $90,000 for the six months ended June 30, 1998 and 1999, respectively.
10. Subsequent Events (Unaudited)
Capital Call:
Effective January 26, 1999, the Company entered into an agreement with MTI
and EDC. The agreement provides that the Company has the right to call upon
MTI and EDC to make capital contributions (Capital Call), at any time through
December 31, 2000, if the Company determines that it requires additional
funds, as follows:
. The agreement requires both MTI and EDC to each fund capital calls of up
to $7.5 million in 1999 and $15 million in 2000 (Capital Commitment).
. In exchange for such Capital Commitment, MTI and EDC will receive Class
A membership interests from the Company at $7.50 per interest.
. MTI and EDC will share the Capital Commitment equally.
. The Company's Board of Managers will determine when there is a
requirement for additional funds.
. MTI and EDC shall have sixty days from the date of such determination to
tender their payment to the Company.
The agreement will terminate on the earlier of i) December 31, 2000 or ii)
an initial public offering of shares by the Company at a price of greater than
$7.50 per share (Termination Date).
F-13
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
10. Subsequent Events (Unaudited), continued
Under an amendment to the agreement, the Company has also agreed to permit MTI
and EDC to make capital contributions on the Termination Date, whether or not
such funds have been called, to the extent of their Capital Commitment. Such
contributions will be made at a fixed price of $7.50 per Class A membership
interest.
If the Company makes a Capital Call and either MTI or EDC fail to make the
required capital contribution (Defaulting Member), then such Defaulting Member
shall permanently forfeit the right to receive the interests it is entitled to
under the agreement (Defaulted Interests). Additionally, to the extent of
outstanding Capital Commitments, the Defaulting Member shall forfeit the right
to receive additional interests equal to two times the Defaulted Interests. The
non-defaulting Member may then elect to fund the Defaulting Member's share of
the Capital Call in exchange for membership interests at the fixed price of
$7.50 per interest.
Subsequent to June 30, 1999, the Company made a capital call on EDC and MTI
in the amount of $4,000,005, representing 266,667 Class A membership interests
each at $7.50 per share.
GE On-Site Power:
In February 1999, the Company entered into an agreement with GE On-Site
Power, Inc. (a wholly owned subsidiary of General Electric Co.) to create GE
Fuel Cell Systems, L.L.C. (GEFCS) a limited liability company created to market
and distribute fuel cell systems world-wide. GE On-Site Power, Inc. owns 75% of
the new entity and the Company owns 25% of the new entity.
As part of the agreement, the Company will work closely with General
Electric's Corporate Research and Development Center for product development
and manufacturing support. GEFCS will market, sell, install and service fuel
cells systems, designed and manufactured by the Company, world-wide (with the
exception of EDC's exclusive four state territory of Michigan, Ohio, Indiana
and Illinois) for residential and small business power applications up to 35kW.
In addition, the Company entered into a ten year distribution agreement with
GEFCS that requires GEFCS purchase from the Company a specified number of pre-
commercial units by December 31, 2000.
In accordance with the terms of the agreement, General Electric will provide
capital, in the form of loans, to fund the purchase of pre-commercial units
during the period ending December 31, 2000. General Electric will also provide
additional capital, in the form of a loan not to exceed $8.0 million, to fund
the operations of GEFCS. The Company has agreed to purchase a minimum of $12.0
million of technical support services over a three year period and extend the
term of the distribution agreement by five years to 2009.
In connection with the formation of GEFCS, the Company issued 2,250,000 Class
A membership interests to GE On-Site Power, Inc. in exchange for a 25% interest
in GEFCS. Of these, 750,000 interests vested immediately and the remaining
1,500,000 interests in August 1999. As of the date of the issuance of such
interests, the Company capitalized $11,250,000, the fair value of the interests
issued, under the caption "Investment in Affiliate."
F-14
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
10. Subsequent Events (Unaudited), continued
The Company accounts for its interest in GEFCS on the equity method of
accounting and adjusts its investment by its proportionate share of income or
losses under the caption "Equity in losses of affiliate". At June 30, 1999, the
difference between the amount at which the investment is carried and the amount
of the underlying equity in net assets of GEFCS is $10,749,552. Such amount is
being amortized on the straight line basis over a ten year period.
The Company also issued warrants to purchase 3,000,000 additional Class A
membership interests at $12.50 per interest. These warrants expire the later of
i) December 31, 2000, ii) twelve months after an initial public offering of
shares, by the Company, at a price less than $12.50 per share, or iii) an
initial public offering of shares, by the Company, at a price of at least
$12.50 per share.
Other Financing Transactions:
During the first quarter of 1999 MTI and EDC each purchased 300,000 Class A
membership interests for $1.5 million each.
In February 1999, two investors purchased 1,500,000 Class A membership
interests for $10.0 million. In addition, one of the investors received a
warrant to purchase 400,000 Class A membership interests at a price of $8.50
per interest. These warrants expire at the earliest of i) December 31, 2001,
ii) an initial public offering of the Company, at a price of at least $8.50 per
share, or iii) eighteen months after an initial public offering of shares by
the Company at a price less than $8.50 per share.
In April 1999 an investor purchased 299,850 Class A membership interests for
$2.0 million.
In April 1999, an investor purchased 1,000,000 Class A membership interests
for $6.7 million. In connection with the purchase agreement, the investor is
required to spend an aggregate of $840,000 for market research and related
services on behalf of the Company. In the event such amounts are not expended
by April, 2002, up to 111,851 of the previously issued interests may be
returned to the Company. The Company will account for these services by
recording a charge to earnings and a credit to paid-in capital as these
services are rendered. As of June 30, 1999, no services had been provided.
Additionally, the investor received warrants to purchase an additional 350,000
Class A membership interests at an exercise price of $8.50 per interest. These
warrants terminate on the earliest of i) December 31, 2001, ii) an initial
public offering of shares, by the Company, at a price of at least $8.50 per
share, or iii) twelve months after an initial public offering of shares, by the
Company, at a price less than $8.50 per share.
On June 23, 1999, EDC purchased 704,315 interests of the Company's Class A
membership interests for $4,697,782. Also, the Company entered into a purchase
agreement with MTI to acquire approximately 36 acres of land, two commercial
buildings and a residential building located in Latham, New York in exchange
for 704,315 Class A membership interests.
As part of the transaction, the Company assumed a $6.2 million letter of
credit to KeyBank National Association. In connection with the agreement, the
Company was required to escrow $6.2 million. The KeyBank debt was issued for
the express purpose of servicing debt related to $6.2 million of Industrial
Development Revenue (IDR) Bonds issued by the Town of Colonie Industrial
Development Agency.
F-15
<PAGE>
PLUG POWER, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS--(Continued)
June 30, 1998 and 1999 amounts are unaudited
10. Subsequent Events (Unaudited), continued
The transaction closed on July 7, 1999, and a receivable for membership
interests of $4,697,782 is recorded as membership interests subscribed as of
June 30, 1999. Simultaneous with the July closing, the Company agreed to lease
back to MTI certain office and manufacturing space on a short-term basis.
In connection with the transaction with MTI, the Company has written off
deferred rent expense in the amount of $1,850,000 relating to a 10-year
facilities lease associated with the property.
Option Remeasurement:
Subsequent to June 30, 1999, the Company modified the terms of an employee's
option. The impact of this modification will result in a charge to earnings of
between $680,000 and $800,000 in the fourth quarter of 1999.
Line of Credit:
In October 1999, the Company entered into a loan agreement for a $6.0 million
line of credit from KeyBank, N.A. The line of credit bears interest at the
prime rate in effect from time to time, matures upon the earlier of the closing
of the offering or November 30, 1999, and is collateralized by an assignment of
our right to call capital from Mechanical Technology and Edison Development.
Initial Public Offering:
The Company is currently undertaking an initial public offering. In the event
that the public offering becomes effective, the Company will be converted from
a limited liability corporation to a C corporation with one class of common
stock and authorization to issue preferred stock. In connection with this
conversion, the Company would then be subject to state and federal income taxes
and would account for income taxes under SFAS 109, "Accounting for Income
Taxes". In addition, it is expected that the Company will revise its employee
membership interest plan and implement an employee stock purchase plan.
F-16
<PAGE>
UNDERWRITING
Plug Power and the underwriters named below have entered into an underwriting
agreement with respect to the shares being offered. Subject to certain
conditions, each underwriter has severally agreed to purchase the number of
shares indicated in the following table. Goldman, Sachs & Co., Hambrecht &
Quist LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and FAC/Equities,
a division of First Albany Corporation, are the representatives of the
underwriters.
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Goldman, Sachs & Co.........................................
Hambrecht & Quist LLC.......................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................................
FAC/Equities, a division of First Albany Corporation........
---------
Total..................................................... 6,000,000
=========
</TABLE>
----------------
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional 900,000
shares from Plug Power to cover such sales. They may exercise that option for
30 days. If any shares are purchased pursuant to this option, the underwriters
will severally purchase shares in approximately the same proportion as set
forth in the table above.
The following table shows the per share and total underwriting discounts and
commissions to be paid to the underwriters by Plug Power. Such amounts are
shown assuming both no exercise and full exercise of the underwriters' option
to purchase additional shares.
<TABLE>
<CAPTION>
Paid by Plug Power
------------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share.......................................... $ $
Total.............................................. $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus.
Any shares sold by the underwriters to securities dealers may be sold at a
discount of up to $ per share from the initial public offering price. Any
such securities dealers may resell any shares purchased from the underwriters
to certain other brokers or dealers at a discount of up to $ per share from
the initial offering price. If all the shares are not sold at the initial
offering price, the representatives may change the offering price and the other
selling terms.
Plug Power, its directors, officers and persons owning its common stock have
agreed with the underwriters not to dispose of or hedge any of their common
stock or securities convertible into or exchangeable for shares of common stock
during the period from the date of this prospectus continuing through the date
180 days after the date of this prospectus, except with the prior written
consent of the representatives. This agreement does not apply to gifts or
transfers to affiliates or transactions under any existing employee benefit
plans. Please see "Shares Eligible for Future Sale" for a discussion of various
transfer restrictions.
At Plug Power's request, the underwriters have reserved up to 300,000 shares
of the common stock offered hereby for sale, at the initial public offering
price, to employees, customers and other friends of Plug Power through a
directed share program. The number of shares available for sale to
U-1
<PAGE>
the general public will be reduced to the extent these persons purchase the
reserved shares. There can be no assurance that any of the reserved shares will
be so purchased. Any reserved shares not so purchased will be offered by the
underwriters to the general public on the same basis as other shares offered
hereby.
Prior to the offering, there has been no public market for the shares. The
initial public offering price will be negotiated among Plug Power and the
representatives. Among the factors to be considered in determining the initial
public offering price of the shares, in addition to prevailing market
conditions, will be Plug Power's historical performance, estimates of the
business potential and earnings prospects of Plug Power, an assessment of Plug
Power's management and the consideration of the above factors in relation to
market valuation of companies in related businesses.
Application has been made for quotation of the common stock on the Nasdaq
National Market under the symbol of "PLUG".
In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while the offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a particular
underwriter repays to the underwriters a portion of the underwriting discount
received by it because the representatives have repurchased shares sold by or
for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
The underwriters may not confirm sales to discretionary accounts without the
prior written approval of the customer.
Plug Power estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$820,000.
Because of the relationships between First Albany Corporation and Plug Power,
the offering is being conducted in accordance with Rule 2720 of the National
Association of Securities Dealers. See "Certain Relationships and Related
Transactions". That rule requires that the initial public offering price can be
no higher than that recommended by a "qualified independent underwriter", as
defined by the NASD. Goldman, Sachs & Co. has served in that capacity and
performed due diligence investigations and reviewed and participated in the
preparation of the registration statement of which this prospectus forms a
part. Goldman, Sachs & Co. has received $10,000 from Plug Power as compensation
for such role.
Plug Power has agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
U-2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell the shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 8
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Historical Financial Data....................................... 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20
Business................................................................. 30
Management............................................................... 45
Certain Relationships and Related Transactions........................... 54
Principal Stockholders................................................... 58
Description of Capital Stock............................................. 60
Shares Eligible For Future Sale.......................................... 64
Validity of Common Stock................................................. 65
Experts.................................................................. 65
Where You Can Find More Information...................................... 65
Index to Financial Statements............................................ F-1
Underwriting............................................................. U-1
</TABLE>
---------------
Through and including , 1999 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as an underwriter and with respect to an unsold allotment or
subscription.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6,000,000 Shares
Common Stock
---------------
PROSPECTUS
---------------
Goldman, Sachs & Co.
Hambrecht & Quist
Merrill Lynch & Co.
FAC/Equities
Representatives of the Underwriters
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses payable by us in
connection with the offering (excluding underwriting discounts and
commissions):
<TABLE>
<CAPTION>
Nature of Expense Amount
----------------- --------
<S> <C>
SEC Registration Fee.................................................. $ 32,610
NASD Filing Fee....................................................... 12,230
Nasdaq National Market Listing Fee.................................... 66,875
Accounting Fees and Expenses.......................................... 180,000
Legal Fees and Expenses............................................... 310,000
Printing Expenses..................................................... 130,000
Blue Sky Qualification Fees and Expenses.............................. 35,000
Transfer Agent's Fee.................................................. 4,000
Miscellaneous......................................................... 49,285
--------
TOTAL............................................................... $820,000
========
</TABLE>
The amounts set forth above, except for the Securities and Exchange
Commission and National Association of Securities Dealers, Inc. fees, are in
each case estimated.
Item 14. Indemnification of Directors and Officers
In accordance with Section 145 of the Delaware General Corporation Law,
Article VII of our amended and restated certificate of incorporation provides
that no director of Plug Power shall be personally liable to Plug Power or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (1) for any breach of the director's duty of loyalty to
Plug Power or its stockholders, (2) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3) in
respect of unlawful dividend payments or stock redemptions or repurchases, or
(4) for any transaction from which the director derived an improper personal
benefit. In addition, our amended and restated certificate of incorporation
provides that if the Delaware General Corporation Law is amended to authorize
the further elimination or limitation of the liability of directors, then the
liability of a director of the corporation shall be eliminated or limited to
the fullest extent permitted by the Delaware General Corporation Law, as so
amended.
Article V of our amended and restated by-laws provides for indemnification by
Plug Power of its officers and certain non-officer employees under certain
circumstances against expenses, including attorneys fees, judgments, fines and
amounts paid in settlement, reasonably incurred in connection with the defense
or settlement of any threatened, pending or completed legal proceeding in which
any such person is involved by reason of the fact that such person is or was an
officer or employee of the registrant if such person acted in good faith and in
a manner he or she reasonably believed to be in or not opposed to the best
interests of Plug Power, and, with respect to criminal actions or proceedings,
if such person had no reasonable cause to believe his or her conduct was
unlawful.
Item 15. Recent Sales of Unregistered Securities
Since its formation in June 1997, Plug Power has issued the following
securities that were not registered under the Securities Act of 1933, as
amended (the "Securities Act"). The shares of capital
II-1
<PAGE>
stock and other securities issued in the following transactions were offered
and sold in reliance upon the following exemptions: (i) in the case of the
transactions described in (a) below, Section 4(2) of the Securities Act or
Regulation D promulgated thereunder relative to sales by an issuer not
involving a public offering; and (ii) in the case of the transactions described
in (b) below, Section 3(b) of the Securities Act and Rule 701 promulgated
thereunder relative to sales pursuant to certain compensatory benefits plans.
(a) Issuance of Capital Stock:
(i) In June 1997, Plug Power sold 4,750,000 shares of its common stock
for an aggregate purchase price of $4,750,000 to Edison Development.
(ii) In June 1997, Plug Power sold 4,750,000 shares of its common stock
for an aggregate purchase price of $4,750,000 to Mechanical
Technology.
(iii) In April 1998, Plug Power sold 2,250,000 shares of its common
stock for an aggregate purchase price of $2,250,000 to Edison
Development.
(iv) In April 1998, Plug Power sold options to purchase an aggregate of
250,000 shares of its common stock at an exercise price of $1.00
per share to Mechanical Technology for a purchase price of $21,250.
(v) In June 1998, Plug Power sold 2,000,000 shares of its common stock
for an aggregate purchase price of $2,000,000 to Edison Development.
(vi) In June 1998, Plug Power sold 2,000,000 shares of its common stock
in consideration of a below-market real estate leasehold interest
to Mechanical Technology.
(vii) In June 1998, Plug Power sold options to purchase an aggregate of
2,000,000 shares of its common stock at an exercise price of $1.00
per share to Mechanical Technology for a purchase price of
$170,000.
(viii) In August 1998, Plug Power sold 200,000 shares of its common
stock for an aggregate purchase price of $1,000,000 to Edison
Development.
(ix) In August 1998, Plug Power sold 200,000 shares of its common stock
for an aggregate purchase price of $1,000,000 to Mechanical
Technology.
(x) In October 1998, Plug Power sold 200,000 shares of its common stock
for an aggregate purchase price of $1,000,000 to Edison Development.
(xi) In October 1998, Plug Power sold 200,000 shares of its common stock
for an aggregate purchase price of $1,000,000 to Mechanical
Technology.
(xii) In November 1998, Plug Power sold 200,000 shares of its common
stock for an aggregate purchase price of $1,000,000 to Edison
Development.
(xiii) In November 1998, Plug Power sold 200,000 shares of its common
stock for an aggregate purchase price of $1,000,000 to Mechanical
Technology.
(xiv) In December 1998, Plug Power sold 100,000 shares of its common
stock for an aggregate purchase price of $500,000 to Edison
Development.
(xv) In December 1998, Plug Power sold 100,000 shares of its common
stock for an aggregate purchase price of $500,000 to Mechanical
Technology.
(xvi) In January 1999, Plug Power sold 100,000 shares of Plug Power's
common stock for an aggregate purchase price of $500,000 to Edison
Development.
(xvii) In January 1999, Plug Power sold 100,000 shares of Plug Power's
common stock for an aggregate purchase price of $500,000 to
Mechanical Technology.
II-2
<PAGE>
(xviii) In January 1999, pursuant to an Equity Contribution and Warrant
Agreement, Plug Power granted each of Mechanical Technology and
Edison Development warrants to purchase up to 3,000,000 shares
of Plug Power's common stock at an exercise price of $7.50 per
share.
(xix) In February 1999, Plug Power sold 200,000 shares of Plug Power's
common stock for an aggregate purchase price of $1,000,000 to
Edison Development.
(xx) In February 1999, Plug Power sold 200,000 shares of Plug Power's
common stock for an aggregate purchase price of $1,000,000 to
Mechanical Technology.
(xxi) In February 1999, Plug Power sold 2,250,000 shares of Plug Power's
common stock to GE On-Site Power, Inc. in consideration of Plug
Power's receipt of a 25% interest in GE Fuel Systems, LLC.
(xxii) In February 1999, Plug Power sold 1,440,000 shares of Plug
Power's common stock for an aggregate purchase price of
$9,600,000 to Michael Cudahy.
(xxiii) In February 1999, Plug Power granted warrants to purchase an
aggregate of 400,000 shares of Plug Power's common stock to
Michael Cudahy at an exercise price of $8.50 per share.
(xxiv) In February 1999, Plug Power sold 60,000 shares of Plug Power's
common stock for an aggregate purchase price of $400,000 to Kevin
Lindsey.
(xxv) In February 1999, Plug Power granted a warrant to purchase up to
3,000,000 shares of Plug Power's common stock to GE On-Site Power,
Inc. at an exercise price of $12.50 per share.
(xxvi) In March 1999, Plug Power issued 2,250,000 shares of Plug Power's
common stock to Mechanical Technology upon the exercise of its
outstanding options in consideration of the application by
Mechanical Technology of certain non-cash research credits
towards the exercise price.
(xxvii) In April 1999, Plug Power sold 299,850 shares of Plug Power's
common stock for an aggregate purchase price of $2,000,000 to
Antaeus Enterprises, Inc.
(xxviii) In April 1999, Plug Power sold 1,000,000 shares of Plug Power's
common stock for an aggregate purchase price of $6,670,000 to
Southern California Gas Company.
(xxix) In April 1999, Plug Power granted warrants to purchase an
aggregate of 350,000 shares of Plug Power's common stock to
Southern California Gas Company at an exercise price of $8.50 per
share.
(xxx) In June 1999, Plug Power sold 704,315 shares of Plug Power's
common stock for an aggregate purchase price of $4,697,782 to
Edison Development.
(xxxi) In June 1999, Plug Power sold 704,315 shares of Plug Power's
common stock in consideration of the net asset value of certain
real estate to Mechanical Technology.
(xxxii) In September 1999, Plug Power sold 266,667 shares of Plug Power's
common stock at an exercise price of $7.50 per share to
Mechanical Technology.
(xxxiii) In September 1999, Plug Power sold 266,667 shares of Plug
Power's common stock at an exercise price of $7.50 per share to
Edison Development.
(b) Grants of Stock Options (i) As of September 30, 1999, options to purchase
3,377,189 shares of common stock were outstanding under Plug Power's
Membership Option Plan of which options to purchase 1,220,782 shares are
exercisable within 60 days of such date. None of the outstanding options
have been exercised. All such options were granted between June 1997 and
July 1999 to officers, directors, employees, consultants and advisors of
Plug Power.
II-3
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
<TABLE>
<CAPTION>
Exhibit Page
Number Description No.
------- --------------------------------------------------------------- ----
<C> <S> <C>
.1.1 Form of Underwriting Agreement.
2.1 Agreement and Plan of Merger by and between Plug Power and Plug
Power, LLC, a Delaware limited liability company, dated as of
October 7, 1999 (excluding schedules, which Plug Power agrees
to furnish supplementally to the Commission upon request).
.3.1 Certificate of Incorporation of Plug Power.
3.2 Amended and Restated Certificate of Incorporation of Plug Power
(to be filed immediately prior to the consummation of the
offering referred to in the Registration Statement).
.3.3 By-laws of Plug Power.
3.4 Amended and Restated By-laws of Plug Power.
.4.1 Specimen certificate for shares of common stock, $.01 par
value, of Plug Power.
5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of
the securities being offered.
+10.1 Amended and Restated Limited Liability Company Agreement of GE
Fuel Cell Systems, LLC, dated February 3, 1999, between GE On-
Site Power, Inc. and Plug Power, LLC.
.10.2 Contribution Agreement, dated as of February 3, 1999, by and
between GE On-Site Power, Inc. and Plug Power, LLC.
.10.3 Trademark and Trade Name Agreement, dated as of February 2,
1999, between General Electric Company and GE Fuel Cell
Systems, LLC.
.10.4 Trademark Agreement, dated as of February 2, 1999, between Plug
Power LLC and GE Fuel Cell Systems, LLC.
+10.5 Distributor Agreement, dated as of February 2, 1999, between GE
Fuel Cell Systems, LLC and Plug Power, LLC.
.10.6 Side letter agreement, dated February 3, 1999, between General
Electric Company and Plug Power LLC.
.10.7 Mandatory Capital Contribution Agreement, dated as of January
26, 1999, between Edison Development Corporation, Mechanical
Technology Incorporated and Plug Power, LLC and amendments
thereto, dated August 25, 1999 and August 26, 1999.
.10.8 LLC Interest Purchase Agreement, dated as of February 16, 1999,
between Plug Power, LLC and Michael J. Cudahy.
.10.9 Warrant Agreement, dated as of February 16, 1999, between Plug
Power, LLC and Michael J. Cudahy and amendment thereto, dated
July 26, 1999.
.10.10 LLC Interest Purchase Agreement, dated as of February 16, 1999,
between Plug Power, LLC and Kevin Lindsey.
.10.11 LLC Interest Purchase Agreement, dated as of April 1, 1999,
between Plug Power, LLC and Antaeus Enterprises, Inc.
.10.12 LLC Interest Purchase Agreement, dated as of April 9, 1999,
between Plug Power, LLC and Southern California Gas Company.
.10.13 Warrant Agreement, dated as of April 9, 1999, between Plug
Power, LLC and Southern California Gas Company and amendment
thereto, dated August 26, 1999.
+10.14 Agreement, dated as of June 26, 1997, between the New York
State Energy Research and Development Authority and Plug Power
LLC, and amendments thereto dated as of December 17, 1997 and
March 30, 1999.
+10.15 Agreement, dated as of January 25, 1999, between the New York
State Energy Research and Development Authority and Plug Power
LLC.
.10.16 Agreement, dated as of September 30, 1997, between Plug Power
LLC and the U.S. Department of Energy.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit Page
Number Description No.
------- --------------------------------------------------------------- ----
<C> <S> <C>
.10.17 Cooperative Agreement, dated as of September 30, 1998, between
the National Institute of Standards and Technology and Plug
Power, LLC, and amendment thereto dated May 10, 1999.
.10.18 Joint venture agreement, dated as of June 14, 1999 between Plug
Power, LLC, Polyfuel, Inc., and SRI International.
+10.19 Cooperative Research and Development Agreement, dated as of
February 12, 1999, between Plug Power, LLC and U.S. Army Benet
Laboratories.
.10.20 Nonexclusive License Agreement, dated as of April 30, 1993,
between Mechanical Technology Incorporated and the Regents of
the University of California.
.10.21 Development Collaboration Agreement, dated as of July 30, 1999,
by and between Joh. Vaillant GMBH. U. CO. and Plug Power, LLC.
.10.22 Agreement of Sale, dated as of June 23, 1999, between
Mechanical Technology, Incorporated and Plug Power LLC.
.10.23 Assignment and Assumption Agreement, dated as of July 1, 1999,
between the Town of Colonie Industrial Development Agency,
Mechanical Technology, Incorporated, Plug Power, LLC, KeyBank,
N.A., and First Albany Corporation.
.10.24 Replacement Reimbursement Agreement, dated as of July 1, 1999,
between Plug Power, LLC and KeyBank, N.A.
10.25 1997 Membership Option Plan and amendment thereto dated
September 27, 1999.
.10.26 Trust Indenture, dated as of December 1, 1998, between the Town
of Colonie Industrial Development Agency and Manufacturers and
Traders Trust Company, as trustee.
+10.27 Distribution Agreement, dated as of June 27, 1997, between Plug
Power, LLC and Edison Development Corporation and amendment
thereto dated September 27, 1999.
.10.28 Agreement, dated as of June 27, 1999, between Plug Power, LLC
and Gary Mittleman.
.10.29 Agreement, dated as of June 8, 1999, between Plug Power, LLC
and Louis R. Tomson.
.10.30 Agreement, dated as of August 6, 1999, between Plug Power, LLC
and Gregory A. Silvestri.
.10.31 Agreement, dated as of August 12, 1999, between Plug Power, LLC
and William H. Largent.
.10.32 Agreement, dated as of August 20, 1999, between Plug Power, LLC
and Dr. Manmohan Dhar.
10.33 1999 Stock Option and Incentive Plan.
10.34 Employee Stock Purchase Plan
.10.35 Agreement, dated as of August 27, 1999, by Plug Power, LLC,
Plug Power Inc., GE On-Site Power, Inc., GE Power Systems
Business of General Electric Company, and GE Fuel Cell Systems,
L.L.C.
10.36 Form of Registration Rights Agreement to be entered into by the
Registrant and the stockholders of the Registrant.
10.37 Form of Registration Rights Agreement to be entered into by
Plug Power, L.L.C. and GE On-Site Power, Inc.
23.1 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1
hereto).
23.2 Consent of PricewaterhouseCoopers LLP.
.24.1 Powers of Attorney (included on signature page).
.27.1 Financial Data Schedule.
.99.1 Consent of Robert L. Nardelli.
99.2 Consent of John M. Shalikashvili
</TABLE>
- --------
+ Filed herewith; portions of this exhibit have been omitted pursuant to a
request for confidential treatment.
. Previously filed.
II-5
<PAGE>
(b) Financial Statement Schedules
All schedules have been omitted because they are not required or because the
required information is given in the Financial Statements or Notes to those
statements.
Item 17. Undertakings
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 4 to the Registration Statement (File No.
333-86089) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Latham, State of New York, on October 26, 1999.
Plug Power Inc.
By: /s/ Gary Mittleman
-----------------------------------
Gary Mittleman
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Gary Mittleman President, Chief Executive October 26, 1999
______________________________________ Officer and Director
Gary Mittleman (Principal Executive
Officer)
/s/ William H. Largent Chief Financial Officer October 26, 1999
______________________________________ (Principal Financial
William H. Largent Officer and Principal
Accounting Officer)
* Director October 26, 1999
______________________________________
Michael J. Cudahy
* Director October 26, 1999
______________________________________
Anthony F. Earley, Jr.
* Director October 26, 1999
______________________________________
Larry G. Garberding
* Director October 26, 1999
______________________________________
George C. McNamee
* Director October 26, 1999
______________________________________
Walter L. Robb
</TABLE>
/s/ Ana-Maria Galeano
*By: __________________________
Ana-Maria Galeano,
Attorney-in-Fact
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- ----------------------------------------------------------------------
<C> <S>
.1.1 Form of Underwriting Agreement.
2.1 Agreement and Plan of Merger by and between Plug Power and Plug Power,
LLC, a Delaware limited liability company, dated as of October 7, 1999
(excluding schedules, which Plug Power agrees to furnish
supplementally to the Commission upon request).
.3.1 Certificate of Incorporation of Plug Power.
3.2 Amended and Restated Certificate of Incorporation of Plug Power (to be
filed immediately prior to the consummation of the offering referred
to in the Registration Statement).
.3.3 By-laws of Plug Power.
3.4 Amended and Restated By-laws of Plug Power.
.4.1 Specimen certificate for shares of common stock, $.01 par value, of
Plug Power.
5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of the
securities being offered.
+10.1 Amended and Restated Limited Liability Company Agreement of GE Fuel
Cell Systems, LLC, dated February 3, 1999, between GE On-Site Power,
Inc. and Plug Power, LLC.
.10.2 Contribution Agreement, dated as of February 3, 1999, by and between
GE On-Site Power, Inc. and Plug Power, LLC.
.10.3 Trademark and Trade Name Agreement, dated as of February 2, 1999,
between General Electric Company and GE Fuel Cell Systems, LLC.
.10.4 Trademark Agreement, dated as of February 2, 1999, between Plug Power
LLC and GE Fuel Cell Systems, LLC.
+10.5 Distributor Agreement, dated as of February 2, 1999, between GE Fuel
Cell Systems, LLC and Plug Power, LLC.
.10.6 Side letter agreement, dated February 3, 1999, between General
Electric Company and Plug Power LLC.
.10.7 Mandatory Capital Contribution Agreement, dated as of January 26,
1999, between Edison Development Corporation, Mechanical Technology
Incorporated and Plug Power, LLC and amendments thereto, dated August
25, 1999 and August 26, 1999.
.10.8 LLC Interest Purchase Agreement, dated as of February 16, 1999,
between Plug Power, LLC and Michael J. Cudahy.
.10.9 Warrant Agreement, dated as of February 16, 1999, between Plug Power,
LLC and Michael J. Cudahy and amendment thereto, dated July 26, 1999.
.10.10 LLC Interest Purchase Agreement, dated as of February 16, 1999,
between Plug Power, LLC and Kevin Lindsey.
.10.11 LLC Interest Purchase Agreement, dated as of April 1, 1999, between
Plug Power, LLC and Antaeus Enterprises, Inc.
.10.12 LLC Interest Purchase Agreement, dated as of April 9, 1999, between
Plug Power, LLC and Southern California Gas Company.
.10.13 Warrant Agreement, dated as of April 9, 1999, between Plug Power, LLC
and Southern California Gas Company and amendment thereto, dated
August 26, 1999.
+10.14 Agreement, dated as of June 26, 1997, between the New York State
Energy Research and Development Authority and Plug Power LLC, and
amendments thereto dated as of December 17, 1997 and March 30, 1999.
+10.15 Agreement, dated as of January 25, 1999, between the New York State
Energy Research and Development Authority and Plug Power LLC.
.10.16 Agreement, dated as of September 30, 1997, between Plug Power LLC and
the U.S. Department of Energy.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- ----------------------------------------------------------------------
<C> <S>
.10.17 Cooperative Agreement, dated as of September 30, 1998, between the
National Institute of Standards and Technology and Plug Power, LLC,
and amendment thereto dated May 10, 1999.
.10.18 Joint venture agreement, dated as of June 14, 1999 between Plug Power,
LLC, Polyfuel, Inc., and SRI International.
+10.19 Cooperative Research and Development Agreement, dated as of February
12, 1999, between Plug Power, LLC and U.S. Army Benet Laboratories.
.10.20 Nonexclusive License Agreement, dated as of April 30, 1993, between
Mechanical Technology Incorporated and the Regents of the University
of California.
.10.21 Development Collaboration Agreement, dated as of July 30, 1999, by and
between Joh. Vaillant GMBH. U. CO. and Plug Power, LLC.
.10.22 Agreement of Sale, dated as of June 23, 1999, between Mechanical
Technology, Incorporated and Plug Power LLC.
.10.23 Assignment and Assumption Agreement, dated as of July 1, 1999, between
the Town of Colonie Industrial Development Agency, Mechanical
Technology, Incorporated, Plug Power, LLC, KeyBank, N.A., and First
Albany Corporation.
.10.24 Replacement Reimbursement Agreement, dated as of July 1, 1999, between
Plug Power, LLC and KeyBank, N.A.
10.25 1997 Membership Option Plan and amendment thereto dated September 27,
1999.
.10.26 Trust Indenture, dated as of December 1, 1998, between the Town of
Colonie Industrial Development Agency and Manufacturers and Traders
Trust Company, as trustee.
+10.27 Distribution Agreement, dated as of June 27, 1997, between Plug Power,
LLC and Edison Development Corporation and amendment thereto dated
September 27, 1999.
.10.28 Agreement, dated as of June 27, 1999, between Plug Power, LLC and
Gary Mittleman.
.10.29 Agreement, dated as of June 8, 1999, between Plug Power, LLC and
Louis R. Tomson.
.10.30 Agreement, dated as of August 6, 1999, between Plug Power, LLC and
Gregory A. Silvestri.
.10.31 Agreement, dated as of August 12, 1999, between Plug Power, LLC and
William H. Largent.
.10.32 Agreement, dated as of August 20, 1999, between Plug Power, LLC and
Dr. Manmohan Dhar.
10.33 1999 Stock Option and Incentive Plan.
10.34 Employee Stock Purchase Plan
.10.35 Agreement, dated as of August 27, 1999, by Plug Power, LLC, Plug Power
Inc., GE On-Site Power, Inc., GE Power Systems Business of General
Electric Company, and GE Fuel Cell Systems, L.L.C.
10.36 Form of Registration Rights Agreement to be entered into by the
Registrant and the stockholders of the Registrant.
10.37 Form of Registration Rights Agreement to be entered into by Plug
Power, L.L.C. and GE On-Site Power, Inc.
23.1 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1
hereto).
23.2 Consent of PricewaterhouseCoopers LLP.
.24.1 Powers of Attorney (included on signature page).
.27.1 Financial Data Schedule.
.99.1 Consent of Robert L. Nardelli.
99.2 Consent of John M. Shalikashvili
</TABLE>
- --------
+ Filed herewith; portions of this exhibit have been omitted pursuant to a
request for confidential treatment.
. Previously filed.
<PAGE>
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
PLUG POWER INC.
a Delaware corporation
AND
PLUG POWER, LLC
a Delaware limited liability company
THIS AGREEMENT AND PLAN OF MERGER (the "Merger Agreement") is made and
entered into as of October 7, by and among Plug Power, LLC, a Delaware
limited liability company (the "Merging Company"), and Plug Power Inc., a
Delaware corporation (the "Surviving Company").
WHEREAS, the Merging Company is a limited liability company duly organized
and existing under the laws of the State of Delaware and the Surviving Company
is a corporation duly organized and existing under the laws of the State of
Delaware;
WHEREAS, the Surviving Company is a wholly-owned subsidiary of the Merging
Company;
WHEREAS, the Board of Directors of the Surviving Company and the Managers
and Members of the Merging Company have determined that it is advisable and to
the advantage of each of the Merging Company and the Surviving Company to merge
upon the terms and conditions herein provided, in accordance with the applicable
provisions of the statutes of the State of Delaware;
NOW THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, the Merging Company and the Surviving Company agree to merge as
follows:
THE MERGER
1.01. The Merger. In accordance with the provisions of this Merger
----------
Agreement and the Delaware General Corporation Law (the "DGCL") and the Delaware
Limited Liability Company Act (the "DLLCA"), the Merging Company will be merged
with and into the Surviving Company (the "Merger") at the Effective Time (as
hereinafter defined). Following the Effective Time, the identity and separate
existence of the Merging Company shall cease and all of the rights, titles,
<PAGE>
privileges, powers, franchises, properties, and assets of the Merging Company of
any kind or nature shall be vested in the Surviving Company, and all debts,
liabilities, duties and other obligations of the Merging Company shall attach to
the Surviving Company, and, following the Effective Time, the Surviving Company
shall continue its existence as a corporation, and the identity, rights, titles,
privileges, powers, franchises, properties and assets of the Surviving Company
shall continue unaffected and unimpaired by the Merger.
1.02. Effective Time and Date. The Merging Company and the Surviving
-----------------------
Company shall cause the Merger to be consummated by filing a Certificate of
Merger with the Secretary of State of the State of Delaware in such form as
required by, and executed in accordance with, the DGCL and the DLLCA. The term
"Effective Time" shall mean 10 am on the date of consummation of the Initial
Public Offering of the Surviving Company's common stock.
1.03. Organizational Documents. The Certificate of Incorporation and
------------------------
By-laws of the Surviving Company immediately prior to the Effective Time shall
remain in effect until further amended as provided therein or as provided by
law. No amendments or changes to the Certificate of Incorporation and By-laws
of the Surviving Company shall be effected by the Merger.
1.04. Common Stock; Membership Interests
----------------------------------
(a) At the Effective Time, each share of Surviving Company Common
Stock then outstanding shall, by virtue of the Merger and without any
action on the part of any holder thereof, cease to be outstanding and shall
be cancelled and retired and shall cease to exist.
(b) At the Effective Time, each share of Merging Company Class A
Membership Interests and Class B Membership Interests then outstanding
shall, by virtue of the Merger and without any action on the part of any
holder thereof, be converted into the right to receive one (1) fully paid
and non-assessable share of Surviving Company Common Stock.
(c) At the Effective Time, each right to acquire a share of
Merging Company Class A Membership Interests or Class B Membership
Interests upon the conversion or exercise of any then outstanding options,
warrants or other derivative securities of the Company, shall by virtue of
the Merger and without any action on the part of any holder thereof, be
converted into the right to acquire, at the same exercise price and upon
the same vesting provisions and other terms thereof, one (1) fully paid and
non-assessable share of Surviving Company Common Stock upon the conversion
or exercise of such option, warrant or other derivative security.
1.05. Additional Actions. If, at any time on and after the Effective
------------------
Time, the Surviving Company or its successors and assigns shall consider or be
advised that any further assignments or assurances in law or any organizational
or other acts are necessary or desirable (a) to vest,
2
<PAGE>
perfect or confirm, of record or otherwise, in the Surviving Company title to
and possession of any property or right of the Merging Company acquired or to be
acquired by reason of, or as a result of, the Merger, or (b) otherwise to carry
out the purposes of the Merger Agreement, the Merging Company and its members,
managers and officers shall be deemed to have granted to the Surviving Company
an irrevocable power of attorney to execute and deliver all such proper deeds,
assignments and assurances in law and to do all acts necessary or proper to
vest, perfect or confirm title to and possession of such property or rights in
the Surviving Company and otherwise to carry out the purposes of the Merger
Agreement; and the directors and officers of the Surviving Company are fully
authorized in the name of the Merging Company or otherwise to take any and all
such action.
1.06. Amendment and Abandonment. Subject to applicable law, at any
-------------------------
time prior to the Effective Time, the officer(s) and director(s) of the
Surviving Company and the managers or members of the Merging Company may amend
or abandon the Merger Agreement, without the vote of the constituent
stockholders or members, respectively.
* * * * * * *
3
<PAGE>
IN WITNESS WHEREOF, this Merger Agreement is hereby executed as of the date
first above written on behalf of the Merging Company and the Surviving Company.
SURVIVING COMPANY
-----------------
PLUG POWER INC.,
a Delaware corporation
By: /s/ Gary Mittleman
--------------------------------------
Name: Gary Mittleman
Its: President and Chief Executive Officer
MERGING COMPANY
---------------
PLUG POWER, LLC,
a Delaware limited liability company
By: /s/ Gary Mittleman
--------------------------------------
Name: Gary Mittleman
Its: President and Chief Executive Officer
4
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PLUG POWER INC.
PLUG POWER INC., a corporation organized and existing under the laws of the
State of Delaware (the "Corporation"), hereby certifies as follows:
1. The name of the Corporation is Plug Power Inc. The date of the filing
of its original Certificate of Incorporation (the "Original Certificate") with
the Secretary of State of the State of Delaware was August 13, 1999.
2. This Amended and Restated Certificate of Incorporation amends,
restates and integrates the provisions of the Original Certificate, and (i) was
duly adopted by the Board of Directors in accordance with the provisions of
Sections 242 and 245 of the Delaware General Corporation Law (the "DGCL"), (ii)
was declared by the Board of Directors of the Corporation (the "Board of
Directors") to be advisable and in the best interests of the Corporation and was
directed by the Board of Directors to be submitted to and be considered by the
stockholders of the Corporation entitled to vote thereon for approval by the
affirmative vote of such stockholders in accordance with Section 242 of the DGCL
and (iii) was duly adopted by the stockholders, with the holders of a majority
of the outstanding shares of the Company's common stock, par value $.01 per
share (the "Common Stock"), adopting this Amended and Restated Certificate of
Incorporation in accordance with the provisions of Section 242 of the DGCL and
the terms of the Original Certificate.
3. The text of the Original Certificate is hereby amended and restated in
its entirety to provide as herein set forth in full.
ARTICLE I
The name of the Corporation is Plug Power Inc.
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is c/o The Corporation Trust Company, 1209 Orange Street in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
<PAGE>
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the DGCL.
ARTICLE IV
CAPITAL STOCK
-------------
The total number of shares of capital stock which the Corporation shall
have authority to issue is One Hundred Million (100,000,000) shares, of which
(i) Ninety-Five Million (95,000,000) shares shall be Common Stock, par value
$.01 per share, and (ii) Five Million (5,000,000) shares shall be undesignated
preferred stock, par value $.01 per share (the "Undesignated Preferred Stock").
Except as otherwise restricted by this Amended and Restated Certificate of
Incorporation, the Board of Directors may, at any time and from time to time, if
all of the shares of capital stock which the Corporation is authorized by this
Amended and Restated Certificate of Incorporation to issue have not been issued,
subscribed for, or otherwise committed to be issued, issue or take subscriptions
for additional shares of its capital stock up to the amount authorized in this
Amended and Restated Certificate of Incorporation to such person or persons and
for such lawful consideration as it may deem appropriate, and generally in its
absolute discretion to determine the terms and the manner of disposition of such
authorized but unissued capital stock.
Any and all such shares issued for which the full consideration has been
paid or delivered shall be deemed fully paid shares of capital stock, and the
holder of such shares shall not be liable for any further call or assessment or
any other payment thereon.
The number of authorized shares of the class of Undesignated Preferred
Stock may from time to time be increased or decreased (but not below the number
of shares outstanding) by the affirmative vote of the holders of a majority of
the outstanding shares of Common Stock entitled to vote, without a vote of the
holders of the Undesignated Preferred Stock (except as otherwise provided in any
certificate of designation of any series of Undesignated Preferred Stock).
The designations, powers, preferences and rights of, and the
qualifications, limitations and restrictions upon, each class or series of stock
shall be determined in accordance with, or as set forth below in, this Article
IV.
2
<PAGE>
A. COMMON STOCK
------------
Subject to all the rights, powers and preferences of the Undesignated
Preferred Stock, and except as provided by law or in this Article IV (or in any
certificate of designation of any series of Undesignated Preferred Stock);
(a) the holders of the Common Stock shall have the exclusive right to
vote for the election of Directors and on all other matters requiring
stockholder action, each share being entitled to one vote;
(b) dividends may be declared and paid or set apart for payment upon
the Common Stock out of any assets or funds of the Corporation legally
available for the payment of dividends, but only when and as declared by
the Board of Directors or any authorized committee thereof; and
(c) upon the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the net assets of the Corporation shall be
distributed pro rata to the holders of the Common Stock.
B. PREFERRED STOCK
---------------
1. Authority to Issue. The total number of shares of Undesignated
------------------
Preferred Stock which the Corporation shall have authority to issue is Five
Million (5,000,000) shares. Subject to any limitations prescribed by law, the
Board of Directors or any authorized committee thereof is expressly authorized
to provide for the issuance of the shares of Undesignated Preferred Stock in one
or more series of such stock, and by filing a certificate pursuant to applicable
law of the State of Delaware, to establish or change from time to time the
number of shares to be included in each such series, and to fix the
designations, powers, preferences and the relative, participating, optional or
other special rights of the shares of each series and any qualifications,
limitations and restrictions thereof.
2. Powers, Preferences, Rights, Qualifications, Limitations and
------------------------------------------------------------
Restriction of Each Series of Undesignated Preferred Stock. The Board of
- ----------------------------------------------------------
Directors or any authorized committee thereof shall have the right to determine
or fix one or more of the following with respect to each series of Undesignated
Preferred Stock to the fullest extent permitted by law:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rates or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so,
from which date or dates, the payment date or dates for dividends, and the
participating and other rights, if any, with respect to dividends;
3
<PAGE>
(c) The voting rights and powers, full or limited, if any, of the
shares of such series;
(d) Whether the shares of such series shall be redeemable and, if so,
the price or prices at which, and the terms and conditions on which, such
shares may be redeemed;
(e) The amount or amounts payable upon the shares of such series and
any preferences applicable thereto in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(f) Whether the shares of such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or redemption
of such shares, and if so entitled, the amount of such fund and the manner
of its application, including the price or prices at which such shares may
be redeemed or purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of the
Corporation and, if so convertible or exchangeable, the conversion price or
prices, or the rate or rates of exchange, and the adjustments thereof, if
any, at which such conversion or exchange may be made, and any other terms
and conditions of such conversion or exchange;
(h) The consideration for which the shares of such series shall be
issued;
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of Undesignated
Preferred Stock (or series thereof) and whether such shares may be reissued
as shares of the same or any other class or series of stock; and
(j) Such other powers, preferences, rights, qualifications,
limitations and restrictions thereof as the Board of Directors or any
authorized committee thereof may deem advisable.
4
<PAGE>
ARTICLE V
STOCKHOLDER ACTION
------------------
1. Action without Meeting. Except as otherwise provided herein, any
----------------------
action required or permitted to be taken by the stockholders of the Corporation
at any annual or special meeting of stockholders of the Corporation must be
effected at a duly called annual or special meeting of stockholders and may not
be taken or effected by a written consent of stockholders in lieu thereof.
2. Special Meetings. Except as otherwise required by law and subject to
----------------
the rights, if any, of the holders of any series of Undesignated Preferred
Stock, special meetings of the stockholders of the Corporation may be called
only by the President, the Chief Executive Officer, the Chairman of the Board,
if one is elected, or the Board of Directors pursuant to a resolution approved
by the affirmative vote of a majority of the directors then in office.
ARTICLE VI
DIRECTORS
---------
1. General. The business and affairs of the Corporation shall be managed
-------
by or under the direction of the Board of Directors except as otherwise provided
herein or required by law.
2. Election of Directors. Election of Directors need not be by written
---------------------
ballot unless the By-laws of the Corporation shall so provide.
3. Terms of Directors. The number of Directors of the Corporation shall
------------------
be fixed solely by resolution duly adopted from time to time by the Board of
Directors. The Directors, other than those who may be elected by the holders of
any series of Undesignated Preferred Stock, shall be classified, with respect to
the term for which they severally hold office, into three classes, as nearly
equal in number as possible. The initial Class I Directors of the Corporation
shall be Gary Mittleman, Walter L. Robb and Anthony F. Earley, Jr.; the initial
Class II Directors of the Corporation shall be George C. McNamee and Michael J.
Cudahy; and the initial Class III Directors of the Corporation shall be General
John M. Shalikashvili, Larry G. Garberding and Robert L. Nardelli. The initial
Class I Directors shall serve for a term expiring at the annual meeting of
stockholders to be held in 2000, the initial Class II Directors shall serve for
a term expiring at the annual meeting of stockholders to be held in 2001, and
the initial Class III Directors shall serve for a term expiring at the annual
meeting of stockholders to be held in 2002. At each annual meeting of
stockholders, the successor or successors of the class of Directors whose term
expires at that meeting shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of Directors, except where a larger vote is required by
law, by this Amended and Restated Certificate of Incorporation or the By-laws,
and shall hold office for a term expiring at the
5
<PAGE>
annual meeting of stockholders held in the third year following the year of
their election. The Directors elected to each class shall hold office until
their successors are duly elected and qualified or until their earlier
resignation or removal.
Notwithstanding the foregoing, whenever, pursuant to the provisions of
Article IV of this Amended and Restated Certificate of Incorporation, the
holders of any one or more series of Undesignated Preferred Stock shall have the
right, voting separately as a series or together with holders of other such
series, to elect Directors at an annual or special meeting of stockholders, the
election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of this Amended and Restated
Certificate of Incorporation and any certificate of designation applicable
thereto, and such Directors so elected shall not be divided into classes
pursuant to this Article VI.3.
4. Vacancies. Subject to the rights, if any, of the holders of any
---------
series of Undesignated Preferred Stock to elect Directors and to fill vacancies
in the Board of Directors relating thereto, any and all vacancies in the Board
of Directors, however occurring, including, without limitation, by reason of an
increase in size of the Board of Directors, or the death, resignation,
disqualification or removal of a Director, shall be filled solely by the
affirmative vote of a majority of the remaining Directors then in office, even
if less than a quorum of the Board of Directors. Any Director appointed in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of Directors in which the new directorship was
created or the vacancy occurred and until such Director's successor shall have
been duly elected and qualified or until his or her earlier resignation or
removal. Subject to the rights, if any, of the holders of any series of
Undesignated Preferred Stock to elect Directors, when the number of Directors is
increased or decreased, the Board of Directors shall determine the class or
classes to which the increased or decreased number of Directors shall be
apportioned; provided, however, that no decrease in the number of Directors
-----------------
shall shorten the term of any incumbent Director. In the event of a vacancy in
the Board of Directors, the remaining Directors, except as otherwise provided by
law, may exercise the powers of the full Board of Directors until the vacancy is
filled.
5. Removal. Subject to the rights, if any, of any series of Undesignated
-------
Preferred Stock to elect Directors and to remove any Director whom the holders
of any such stock have the right to elect, any Director (including persons
elected by Directors to fill vacancies in the Board of Directors) may be removed
from office (i) only with cause and (ii) only by the affirmative vote of the
holders of two-thirds of the shares then entitled to vote at an election of
Directors. At least thirty (30) days prior to any meeting of stockholders at
which it is proposed that any Director be removed from office, written notice of
such proposed removal shall be sent to the Director whose removal will be
considered at the meeting.
6
<PAGE>
ARTICLE VII
LIMITATION OF LIABILITY
-----------------------
A Director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (a) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders, (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the DGCL or (d) for any transaction
from which the Director derived an improper personal benefit. If the DGCL is
amended after the effective date of this Amended and Restated Certificate of
Incorporation to authorize corporate action further eliminating or limiting the
personal liability of Directors, then the liability of a Director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the DGCL, as so amended.
Any repeal or modification of this Article VII by either of (i) the
stockholders of the Corporation or (ii) an amendment to the DGCL, shall not
adversely affect any right or protection existing at the time of such repeal or
modification with respect to any acts or omissions occurring before such repeal
or modification of a person serving as a Director at the time of such repeal or
modification.
ARTICLE VIII
AMENDMENT OF BY-LAWS
--------------------
1. Amendment by Directors. Except as otherwise provided by law, the By-
----------------------
laws of the Corporation may be amended or repealed by the Board of Directors by
the affirmative vote of a majority of the Directors then in office.
2. Amendment by Stockholders. The By-laws of the Corporation may be
-------------------------
amended or repealed at any annual meeting of stockholders, or special meeting of
stockholders called for such purpose as provided in the By-laws, by the
affirmative vote of at least two-thirds of the shares present in person or
represented by proxy at such meeting and entitled to vote on such amendment or
repeal, voting together as a single class; provided, however, that if the Board
-----------------
of Directors recommends that stockholders approve such amendment or repeal at
such meeting of stockholders, such amendment or repeal shall only require the
affirmative vote of the majority of the shares present in person or represented
by proxy at such meeting and entitled to vote on such amendment or repeal,
voting together as a single class.
7
<PAGE>
ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
-----------------------------------------
The Corporation reserves the right to amend or repeal this Amended and
Restated Certificate of Incorporation in the manner now or hereafter prescribed
by statute and this Amended and Restated Certificate of Incorporation, and all
rights conferred upon stockholders herein are granted subject to this
reservation. No amendment or repeal of this Amended and Restated Certificate of
Incorporation shall be made unless the same is first approved by the Board of
Directors pursuant to a resolution adopted by the Board of Directors in
accordance with Section 242 of the DGCL, and, except as otherwise provided by
law, thereafter approved by the stockholders. Whenever any vote of the holders
of voting stock is required to amend or repeal any provision of this Amended and
Restated Certificate of Incorporation, and in addition to any other vote of
holders of voting stock that is required by this Amended and Restated
Certificate of Incorporation or by law, such amendment or repeal shall require
the affirmative vote of the majority of the outstanding shares entitled to vote
on such amendment or repeal, and the affirmative vote of the majority of the
outstanding shares of each class entitled to vote thereon as a class, at a duly
constituted meeting of stockholders called expressly for such purpose;
provided, however, that the affirmative vote of not less than 80% of the
- -----------------
outstanding shares entitled to vote on such amendment or repeal, and the
affirmative vote of not less than 80% of the outstanding shares of each class
entitled to vote thereon as a class, shall be required to amend or repeal any
provision of Article V, Article VI, Article VII or Article IX of this Amended
and Restated Certificate of Incorporation.
[End of Text]
8
<PAGE>
THIS AMENDED AND RESTATED CERTIFICATE OF INCORPORATION is executed as of
this ____ day of October, 1999.
PLUG POWER INC.
By: /s/ Gary Mittleman
--------------------------------------
Name: Gary Mittleman
Title: Chief Executive Officer and
President
9
<PAGE>
EXHIBIT 3.4
AMENDED AND RESTATED
BY-LAWS
OF
PLUG POWER INC.
(the "Corporation")
ARTICLE I
---------
Stockholders
------------
SECTION 1. Annual Meeting. The annual meeting of stockholders (any such
--------------
meeting being referred to in these By-laws as an "Annual Meeting") shall be held
at the hour, date and place within or without the United States which is fixed
by the majority of the Board of Directors, the Chairman of the Board, if one is
elected, or the President, which time, date and place may subsequently be
changed at any time by vote of the Board of Directors. If no Annual Meeting has
been held for a period of thirteen months after the Corporation's last Annual
Meeting, a special meeting in lieu thereof may be held, and such special meeting
shall have, for the purposes of these By-laws or otherwise, all the force and
effect of an Annual Meeting. Any and all references hereafter in these By-laws
to an Annual Meeting or Annual Meetings also shall be deemed to refer to any
special meeting(s) in lieu thereof.
SECTION 2. Special Meetings. Except as otherwise required by law and
----------------
subject to the rights, if any, of the holders of any series of preferred stock,
special meetings of the stockholders of the Corporation may be called only by
the President, the Chief Executive Officer, the Chairman of the Board, if one is
elected, or the Board of Directors pursuant to a resolution approved by the
affirmative vote of a majority of the directors then in office.
SECTION 3. Notice of Stockholder Business and Nominations.
----------------------------------------------
(a) Annual Meetings of Stockholders.
-------------------------------
(1) Nominations of persons for election to the Board of Directors of
the Corporation and the proposal of business to be considered by the
stockholders may be made at an Annual Meeting (a) pursuant to the
Corporation's notice of meeting, (b) by or at the direction of the Board of
Directors or (c) by any stockholder of the Corporation who was a
stockholder of record at the time of giving of notice provided for in this
By-law, who is entitled to vote at the meeting and who complied with the
notice procedures set forth in this By-law.
<PAGE>
(2) For nominations or other business to be properly brought before an
Annual Meeting by a stockholder pursuant to clause (c) of paragraph (a)(1)
of this By-law, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation, such other business must be a
proper matter for stockholder action, and such stockholder be present at
such meeting, either in person or by representative. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business
on the 90th day nor earlier than the close of business on the 120th day
prior to the first anniversary of the preceding year's Annual Meeting;
provided, however, that in the event that the date of the Annual Meeting is
more than 30 days before or more than 60 days after such anniversary date,
notice by the stockholder to be timely must be so delivered not earlier
than the close of business on the 120th day prior to such Annual Meeting
and not later than the close of business on the later of the 90th day prior
to such Annual Meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made. Notwithstanding
anything to the contrary provided herein, for the first Annual Meeting
following the initial public offering of common stock of the Corporation, a
stockholder's notice shall be timely if delivered to, or mailed to and
received by, the Corporation at its principal executive office not later
than the close of business on the later of the 90th day prior to the
scheduled date of such Annual Meeting or the 10th day following the day on
which public announcement of the date of such Annual Meeting is first made
or sent by the Corporation. In no event shall the public announcement of
an adjournment of an Annual Meeting commence a new time period for the
giving of a stockholder's notice as described above. Such stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes
to nominate for election or reelection as a director, all information
relating to such person that is required to be disclosed in solicitations
of proxies for election of directors in an election contest, or is
otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule
14a-11 thereunder (including such person's written consent to being named
in the proxy statement as a nominee and to serving as a director if
elected); (b) as to any other business that the stockholder proposes to
bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting, any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made, and the
names and addresses of other stockholders known by the stockholder
proposing such business to support such proposal, and the class and number
of shares of the Corporation's capital stock beneficially owned by such
other stockholders; and (c) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is
made (i) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner, and (ii) the class and
number of shares of the Corporation which are owned beneficially and of
record by such stockholder and such beneficial owner.
2
<PAGE>
(3) Notwithstanding anything in the second sentence of paragraph
(a)(2) of this By-law to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement naming all of the nominees
for director or specifying the size of the increased Board of Directors
made by the Corporation at least 100 days prior to the first anniversary of
the preceding year's Annual Meeting, a stockholder's notice required by
this By-law shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 10th day following
the day on which such public announcement is first made by the Corporation.
(b) Special Meetings of Stockholders. Only such business shall be
--------------------------------
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (a) by or at the direction of the Board of
Directors or (b) by any stockholder of the Corporation who is a stockholder of
record at the time of giving of notice provided for in this By-law, who shall be
entitled to vote at the meeting and who complies with the notice procedures set
forth in this By-law. In the event the Corporation calls a special meeting of
stockholders for the purpose of electing one or more directors to the Board of
Directors, any such stockholder may nominate a person or persons (as the case
may be), for election to such position(s) as specified in the Corporation's
notice of meeting, if the stockholder's notice required by paragraph (a)(2) of
this By-law shall be delivered to the Secretary at the principal executive
offices of the Corporation not earlier than the close of business on the 120th
day prior to such special meeting and not later than the close of business on
the later of the 90th day prior to such special meeting or the 10th day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
(c) General.
-------
(1) Only such persons who are nominated in accordance with the
procedures set forth in this By-law shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as
shall have been brought before the meeting in accordance with the
procedures set forth in this By-law. If the Board of Directors or a
designated committee thereof determines that any stockholder proposal or
nomination was not made in a timely fashion in accordance with the
provisions of this By-law or that the information provided in a
stockholder's notice does not satisfy the information requirements of this
By-law in any material respect, such proposal or nomination shall not be
presented for action at the Annual Meeting in question. If neither the
Board of Directors nor such committee makes a determination as to the
3
<PAGE>
validity of any stockholder proposal or nomination in the manner set forth
above, the presiding officer of the Annual Meeting shall determine whether
the stockholder proposal or nomination was made in accordance with the
terms of this By-law. If the presiding officer determines that any
stockholder proposal or nomination was not made in a timely fashion in
accordance with the provisions of this By-law or that the information
provided in a stockholder's notice does not satisfy the information
requirements of this By-law in any material respect, such proposal or
nomination shall not be presented for action at the Annual Meeting in
question. If the Board of Directors, a designated committee thereof or the
presiding officer determines that a stockholder proposal or nomination was
made in accordance with the requirements of this By-law, the presiding
officer shall so declare at the Annual Meeting and ballots shall be
provided for use at the meeting with respect to such proposal or
nomination.
(2) For purposes of this By-law, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document
publicly filed by the Corporation with the Securities and Exchange
Commission (including, without limitation, a Form 8-K) pursuant to Section
13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this By-law, a
stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this By-law. Nothing in this By-law shall be deemed
to affect any rights of (i) stockholders to request inclusion of proposals
in the Corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act or (ii) the holders of any series of preferred stock to elect
directors under specified circumstances.
SECTION 4. Matters to be Considered at Special Meetings. Only those
--------------------------------------------
matters set forth in the notice of the special meeting may be considered or
acted upon at a special meeting of stockholders of the Corporation, unless
otherwise provided by law.
SECTION 5. Notice of Meetings; Adjournments. A written notice of each
--------------------------------
Annual Meeting stating the hour, date and place of such Annual Meeting shall be
given by the Secretary or an Assistant Secretary (or other person authorized by
these By-laws or by law) not less than 10 days nor more than 60 days before the
Annual Meeting, to each stockholder entitled to vote thereat and to each
stockholder who, by law or under the Certificate of Incorporation of the
Corporation (as the same may hereafter be amended and/or restated, the
"Certificate") or under these By-laws, is entitled to such notice, by delivering
such notice to him or by mailing it, postage prepaid, addressed to such
stockholder at the address of such stockholder as it appears on the
Corporation's stock transfer books. Such notice shall be deemed to be given
when hand delivered to such address or deposited in the mail so addressed, with
postage prepaid.
4
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Notice of all special meetings of stockholders shall be given in the same
manner as provided for Annual Meetings, except that the written notice of all
special meetings shall state the purpose or purposes for which the meeting has
been called.
Notice of an Annual Meeting or special meeting of stockholders need not be
given to a stockholder if a written waiver of notice is signed before or after
such meeting by such stockholder or if such stockholder attends such meeting,
unless such attendance was for the express purpose of objecting at the beginning
of the meeting to the transaction of any business because the meeting was not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any Annual Meeting or special meeting of stockholders need be
specified in any written waiver of notice.
The Board of Directors may postpone and reschedule any previously scheduled
Annual Meeting or special meeting of stockholders and any record date with
respect thereto, regardless of whether any notice or public disclosure with
respect to any such meeting has been sent or made pursuant to Section 3 of this
Article I of these By-laws or otherwise. In no event shall the public
announcement of an adjournment, postponement or rescheduling of any previously
scheduled meeting of stockholders commence a new time period for the giving of a
stockholder's notice under Section 3 of this Article I of these By-laws.
When any meeting is convened, the presiding officer may adjourn the meeting
if (a) no quorum is present for the transaction of business, (b) the Board of
Directors determines that adjournment is necessary or appropriate to enable the
stockholders to consider fully information which the Board of Directors
determines has not been made sufficiently or timely available to stockholders,
or (c) the Board of Directors determines that adjournment is otherwise in the
best interests of the Corporation. When any Annual Meeting or special meeting
of stockholders is adjourned to another hour, date or place, notice need not be
given of the adjourned meeting other than an announcement at the meeting at
which the adjournment is taken of the hour, date and place to which the meeting
is adjourned; provided, however, that if the adjournment is for more than 30
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote thereat and each stockholder who, by law or under the
Certificate or these By-laws, is entitled to such notice.
SECTION 6. Quorum. A majority of the shares entitled to vote, present in
------
person or represented by proxy, shall constitute a quorum at any meeting of
stockholders. If less than a quorum is present at a meeting, the holders of
voting stock representing a majority of the voting power present at the meeting
or the presiding officer may adjourn the meeting from time to time, and the
meeting may be held as adjourned without further notice, except as provided in
Section 5 of this Article I. At such adjourned meeting at which a quorum is
present, any business may be transacted which might have been transacted at the
meeting as originally noticed. The stockholders present at a duly constituted
meeting may continue to
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transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
SECTION 7. Voting and Proxies. Stockholders shall have one vote for each
------------------
share of stock entitled to vote owned by them of record according to the books
of the Corporation, unless otherwise provided by law or by the Certificate.
Stockholders may vote either in person or by written proxy, but no proxy shall
be voted or acted upon after three years from its date, unless the proxy
provides for a longer period. Proxies shall be filed with the Secretary of the
meeting before being voted. Except as otherwise limited therein or as otherwise
provided by law, proxies shall entitle the persons authorized thereby to vote at
any adjournment of such meeting, but they shall not be valid after final
adjournment of such meeting. A proxy with respect to stock held in the name of
two or more persons shall be valid if executed by or on behalf of any one of
them unless at or prior to the exercise of the proxy the Corporation receives a
specific written notice to the contrary from any one of them. A proxy purporting
to be executed by or on behalf of a stockholder shall be deemed valid, and the
burden of proving invalidity shall rest on the challenger.
SECTION 8. Action at Meeting. When a quorum is present, any matter before
-----------------
any meeting of stockholders shall be decided by the affirmative vote of the
majority of shares present in person or represented by proxy at such meeting and
entitled to vote on such matter, except where a larger vote is required by law,
by the Certificate or by these By-laws. Any election by stockholders shall be
determined by a plurality of the votes (of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors), except where a larger vote is required by law, by the Certificate or
by these By-laws. The Corporation shall not directly or indirectly vote any
shares of its own stock; provided, however, that the Corporation may vote shares
which it holds in a fiduciary capacity to the extent permitted by law.
SECTION 9. Stockholder Lists. The Secretary or an Assistant Secretary (or
-----------------
the Corporation's transfer agent or other person authorized by these By-laws or
by law) shall prepare and make, at least 10 days before every Annual Meeting or
special meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least 10 days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the hour, date and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 10. Presiding Officer. The Chairman of the Board, if one is
-----------------
elected, or if not elected or in his or her absence, the President, shall
preside at all Annual Meetings or
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special meetings of stockholders and shall have the power, among other things,
to adjourn such meeting at any time and from time to time, subject to Sections 5
and 6 of this Article I. The order of business and all other matters of
procedure at any meeting of the stockholders shall be determined by the
presiding officer.
SECTION 11. Voting Procedures and Inspectors of Elections. The
---------------------------------------------
Corporation shall, in advance of any meeting of stockholders, appoint one or
more inspectors to act at the meeting and make a written report thereof. The
Corporation may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at
a meeting of stockholders, the presiding officer shall appoint one or more
inspectors to act at the meeting. Any inspector may, but need not, be an
officer, employee or agent of the Corporation. Each inspector, before entering
upon the discharge of his or her duties, shall take and sign an oath faithfully
to execute the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspectors shall perform such duties as are
required by the General Corporation Law of the State of Delaware, as amended
from time to time (the "DGCL"), including the counting of all votes and ballots.
The inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of the duties of the inspectors. The presiding
officer may review all determinations made by the inspectors, and in so doing
the presiding officer shall be entitled to exercise his or her sole judgment and
discretion and he or she shall not be bound by any determinations made by the
inspectors. All determinations by the inspectors and, if applicable, the
presiding officer, shall be subject to further review by any court of competent
jurisdiction.
ARTICLE II
----------
Directors
---------
SECTION 1. Powers. The business and affairs of the Corporation shall be
------
managed by or under the direction of the Board of Directors except as otherwise
provided by the Certificate or required by law.
SECTION 2. Number and Terms. The number of directors of the Corporation
----------------
shall be fixed by resolution duly adopted from time to time by the Board of
Directors. The directors shall hold office in the manner provided in the
Certificate.
SECTION 3. Qualification. No director need be a stockholder of the
-------------
Corporation.
SECTION 4. Vacancies. Subject to the rights, if any, of the holders of
---------
any series of preferred stock to elect directors and to fill vacancies in the
Board of Directors relating thereto, any and all vacancies in the Board of
Directors, however occurring, including, without limitation, by reason of an
increase in size of the Board of Directors, or the death, resignation,
disqualification or removal of a director, shall be filled solely by the
affirmative vote of a
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majority of the remaining directors then in office, even if less than a quorum
of the Board of Directors. Any director appointed in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
class of directors in which the new directorship was created or the vacancy
occurred and until such director's successor shall have been duly elected and
qualified or until his or her earlier resignation or removal. Subject to the
rights, if any, of the holders of any series of preferred stock to elect
directors, when the number of directors is increased or decreased, the Board of
Directors shall determine the class or classes to which the increased or
decreased number of directors shall be apportioned; provided, however, that no
decrease in the number of directors shall shorten the term of any incumbent
director. In the event of a vacancy in the Board of Directors, the remaining
directors, except as otherwise provided by law, may exercise the powers of the
full Board of Directors until the vacancy is filled.
SECTION 5. Removal. Directors may be removed from office in the manner
-------
provided in the Certificate.
SECTION 6. Resignation. A director may resign at any time by giving
-----------
written notice to the Chairman of the Board, if one is elected, the President or
the Secretary. A resignation shall be effective upon receipt, unless the
resignation otherwise provides.
SECTION 7. Regular Meetings. The regular annual meeting of the Board of
----------------
Directors shall be held, without notice other than this Section 7, on the same
date and at the same place as the Annual Meeting following the close of such
meeting of stockholders. Other regular meetings of the Board of Directors may
be held at such hour, date and place as the Board of Directors may by resolution
from time to time determine without notice other than such resolution.
SECTION 8. Special Meetings. Special meetings of the Board of Directors
----------------
may be called, orally or in writing, by or at the request of a majority of the
directors, the Chairman of the Board, if one is elected, or the President. The
person calling any such special meeting of the Board of Directors may fix the
hour, date and place thereof.
SECTION 9. Notice of Meetings. Notice of the hour, date and place of all
------------------
special meetings of the Board of Directors shall be given to each director by
the Secretary or an Assistant Secretary, or in case of the death, absence,
incapacity or refusal of such persons, by the Chairman of the Board, if one is
elected, or the President or such other officer designated by the Chairman of
the Board, if one is elected, or the President. Notice of any special meeting
of the Board of Directors shall be given to each director in person, by
telephone, or by facsimile, telex, telecopy, telegram, or other written form of
electronic communication, sent to his or her business or home address, at least
24 hours in advance of the meeting, or by written notice mailed to his or her
business or home address, at least 48 hours in advance of the meeting. Such
notice shall be deemed to be delivered when hand delivered to such address, read
to such director by telephone, deposited in the mail so addressed, with postage
thereon
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<PAGE>
prepaid if mailed, dispatched or transmitted if faxed, telexed or telecopied, or
when delivered to the telegraph company if sent by telegram.
When any Board of Directors meeting, either regular or special, is
adjourned for 30 days or more, notice of the adjourned meeting shall be given as
in the case of an original meeting. It shall not be necessary to give any
notice of the hour, date or place of any meeting adjourned for less than 30 days
or of the business to be transacted thereat, other than an announcement at the
meeting at which such adjournment is taken of the hour, date and place to which
the meeting is adjourned.
A written waiver of notice signed before or after a meeting by a director
and filed with the records of the meeting shall be deemed to be equivalent to
notice of the meeting. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because such meeting is not lawfully called or
convened. Except as otherwise required by law, by the Certificate or by these
By-laws, neither the business to be transacted at, nor the purpose of, any
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting.
SECTION 10. Quorum. At any meeting of the Board of Directors, a majority
------
of the directors then in office shall constitute a quorum for the transaction of
business, but if less than a quorum is present at a meeting, a majority of the
directors present may adjourn the meeting from time to time, and the meeting may
be held as adjourned without further notice, except as provided in Section 9 of
this Article II. Any business which might have been transacted at the meeting
as originally noticed may be transacted at such adjourned meeting at which a
quorum is present.
SECTION 11. Action at Meeting. At any meeting of the Board of Directors
-----------------
at which a quorum is present, a majority of the directors present may take any
action on behalf of the Board of Directors, unless otherwise required by law, by
the Certificate or by these By-laws.
SECTION 12. Action by Consent. Any action required or permitted to be
-----------------
taken at any meeting of the Board of Directors may be taken without a meeting if
all members of the Board of Directors consent thereto in writing. Such written
consent shall be filed with the records of the meetings of the Board of
Directors and shall be treated for all purposes as a vote at a meeting of the
Board of Directors.
SECTION 13. Manner of Participation. Directors may participate in
-----------------------
meetings of the Board of Directors by means of conference telephone or similar
communications equipment by means of which all directors participating in the
meeting can hear each other, and participation in a meeting in accordance
herewith shall constitute presence in person at such meeting for purposes of
these By-laws.
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<PAGE>
SECTION 14. Committees. The Board of Directors, by vote of a majority of
----------
the directors then in office, may elect from its number one or more committees,
including, without limitation, an Executive Committee, a Compensation Committee,
a Stock Option Committee and an Audit Committee, and may delegate thereto some
or all of its powers except those which by law, by the Certificate or by these
By-laws may not be delegated. Except as the Board of Directors may otherwise
determine, any such committee may make rules for the conduct of its business,
but unless otherwise provided by the Board of Directors or in such rules, its
business shall be conducted so far as possible in the same manner as is provided
by these By-laws for the Board of Directors. All members of such committees
shall hold such offices at the pleasure of the Board of Directors. The Board of
Directors may abolish any such committee at any time. Any committee to which
the Board of Directors delegates any of its powers or duties shall keep records
of its meetings and shall report its action to the Board of Directors. The
Board of Directors shall have power to rescind any action of any committee, to
the extent permitted by law, but no such rescission shall have retroactive
effect.
SECTION 15. Compensation of Directors. Directors shall receive such
-------------------------
compensation for their services as shall be determined by a majority of the
Board of Directors provided that directors who are serving the Corporation as
employees and who receive compensation for their services as such, shall not
receive any salary or other compensation for their services as directors of the
Corporation.
ARTICLE III
-----------
Officers
--------
SECTION 1. Enumeration. The officers of the Corporation shall consist of
-----------
a President, a Treasurer, a Secretary and such other officers, including,
without limitation, a Chairman of the Board of Directors, a Chief Executive
Officer and one or more Vice Presidents (including Executive Vice Presidents or
Senior Vice Presidents), Assistant Vice Presidents, Assistant Treasurers and
Assistant Secretaries, as the Board of Directors may determine.
SECTION 2. Election. At the regular annual meeting of the Board of
--------
Directors following the Annual Meeting, the Board of Directors shall elect the
President, the Treasurer and the Secretary. Other officers may be elected by
the Board of Directors at such regular annual meeting of the Board of Directors
or at any other regular or special meeting.
SECTION 3. Qualification. No officer need be a stockholder or a director.
-------------
Any person may occupy more than one office of the Corporation at any time. Any
officer may be required by the Board of Directors to give bond for the faithful
performance of his or her duties in such amount and with such sureties as the
Board of Directors may determine.
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<PAGE>
SECTION 4. Tenure. Except as otherwise provided by the Certificate or by
------
these By-laws, each of the officers of the Corporation shall hold office until
the regular annual meeting of the Board of Directors following the next Annual
Meeting and until his or her successor is elected and qualified or until his or
her earlier resignation or removal.
SECTION 5. Resignation. Any officer may resign by delivering his or her
-----------
written resignation to the Corporation addressed to the President or the
Secretary, and such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
SECTION 6. Removal. Except as otherwise provided by law, the Board of
-------
Directors may remove any officer with or without cause by the affirmative vote
of a majority of the Directors then in office.
SECTION 7. Absence or Disability. In the event of the absence or
---------------------
disability of any officer, the Board of Directors may designate another officer
to act temporarily in place of such absent or disabled officer.
SECTION 8. Vacancies. Any vacancy in any office may be filled for the
---------
unexpired portion of the term by the Board of Directors.
SECTION 9. President. The President shall, subject to the direction of
---------
the Board of Directors, have general supervision and control of the
Corporation's business. If there is no Chairman of the Board or if he or she is
absent, the President shall preside, when present, at all meetings of
stockholders and of the Board of Directors. The President shall have such other
powers and perform such other duties as the Board of Directors may from time to
time designate.
SECTION 10. Chairman of the Board. The Chairman of the Board, if one is
---------------------
elected, shall preside, when present, at all meetings of the stockholders and of
the Board of Directors. The Chairman of the Board shall have such other powers
and shall perform such other duties as the Board of Directors may from time to
time designate.
SECTION 11. Chief Executive Officer. The Chief Executive Officer, if one
-----------------------
is elected, shall have such powers and shall perform such duties as the Board of
Directors may from time to time designate.
SECTION 12. Vice Presidents and Assistant Vice Presidents. Any Vice
---------------------------------------------
President (including any Executive Vice President or Senior Vice President) and
any Assistant Vice President shall have such powers and shall perform such
duties as the Board of Directors or the Chief Executive Officer may from time to
time designate.
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<PAGE>
SECTION 13. Treasurer and Assistant Treasurers. The Treasurer shall,
----------------------------------
subject to the direction of the Board of Directors and except as the Board of
Directors or the Chief Executive Officer may otherwise provide, have general
charge of the financial affairs of the Corporation and shall cause to be kept
accurate books of account. The Treasurer shall have custody of all funds,
securities, and valuable documents of the Corporation. He or she shall have
such other duties and powers as may be designated from time to time by the Board
of Directors or the Chief Executive Officer.
Any Assistant Treasurer shall have such powers and perform such duties as
the Board of Directors or the Chief Executive Officer may from time to time
designate.
SECTION 14. Secretary and Assistant Secretaries. The Secretary shall
-----------------------------------
record all the proceedings of the meetings of the stockholders and the Board of
Directors (including committees of the Board) in books kept for that purpose.
In his or her absence from any such meeting, a temporary secretary chosen at the
meeting shall record the proceedings thereof. The Secretary shall have charge of
the stock ledger (which may, however, be kept by any transfer or other agent of
the Corporation). The Secretary shall have custody of the seal of the
Corporation, and the Secretary, or an Assistant Secretary, shall have authority
to affix it to any instrument requiring it, and, when so affixed, the seal may
be attested by his or her signature or that of an Assistant Secretary. The
Secretary shall have such other duties and powers as may be designated from time
to time by the Board of Directors or the Chief Executive Officer. In the absence
of the Secretary, any Assistant Secretary may perform his or her duties and
responsibilities.
Any Assistant Secretary shall have such powers and perform such duties as
the Board of Directors or the Chief Executive Officer may from time to time
designate.
SECTION 15. Other Powers and Duties. Subject to these By-laws and to such
-----------------------
limitations as the Board of Directors may from time to time prescribe, the
officers of the Corporation shall each have such powers and duties as generally
pertain to their respective offices, as well as such powers and duties as from
time to time may be conferred by the Board of Directors or the Chief Executive
Officer.
ARTICLE IV
----------
Capital Stock
-------------
SECTION 1. Certificates of Stock. Each stockholder shall be entitled to a
---------------------
certificate of the capital stock of the Corporation in such form as may from
time to time be prescribed by the Board of Directors. Such certificate shall be
signed by the Chairman of the Board of Directors, the President or a Vice
President and by the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary. The Corporation seal and the signatures by the
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<PAGE>
Corporation's officers, the transfer agent or the registrar may be facsimiles.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed on such certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the time of its issue. Every
certificate for shares of stock which are subject to any restriction on transfer
and every certificate issued when the Corporation is authorized to issue more
than one class or series of stock shall contain such legend with respect thereto
as is required by law.
SECTION 2. Transfers. Subject to any restrictions on transfer and unless
---------
otherwise provided by the Board of Directors, shares of stock may be transferred
only on the books of the Corporation by the surrender to the Corporation or its
transfer agent of the certificate theretofore properly endorsed or accompanied
by a written assignment or power of attorney properly executed, with transfer
stamps (if necessary) affixed, and with such proof of the authenticity of
signature as the Corporation or its transfer agent may reasonably require.
SECTION 3. Record Holders. Except as may otherwise be required by law, by
--------------
the Certificate or by these By-laws, the Corporation shall be entitled to treat
the record holder of stock as shown on its books as the owner of such stock for
all purposes, including the payment of dividends and the right to vote with
respect thereto, regardless of any transfer, pledge or other disposition of such
stock, until the shares have been transferred on the books of the Corporation in
accordance with the requirements of these By-laws.
It shall be the duty of each stockholder to notify the Corporation of his
or her post office address and any changes thereto.
SECTION 4. Record Date. In order that the Corporation may determine
-----------
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date: (a) in the case of determination of stockholders entitled to vote at any
meeting of stockholders, shall, unless otherwise required by law, not be more
than sixty nor less than ten days before the date of such meeting and (b) in the
case of any other action, shall not be more than sixty days prior to such other
action. If no record date is fixed: (i) the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held and (ii) the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
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SECTION 5. Replacement of Certificates. In case of the alleged loss,
---------------------------
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms as the Board of Directors may
prescribe.
ARTICLE V
---------
Indemnification
---------------
SECTION 1. Definitions. For purposes of this Article:
-----------
(a) "Director" means any person who serves or has served the Corporation as
a director on the Board of Directors of the Corporation.
(b) "Officer" means any person who serves or has served the Corporation as
an officer appointed by the Board of Directors of the Corporation;
(c) "Non-Officer Employee" means any person who serves or has served as an
employee of the Corporation, but who is not or was not a Director or Officer;
(d) "Proceeding" means any threatened, pending or completed action, suit,
arbitration, alternate dispute resolution mechanism, inquiry, investigation,
administrative hearing or other proceeding, whether civil, criminal,
administrative, arbitrative or investigative;
(e) "Expenses" means all reasonable attorneys' fees, retainers, court
costs, transcript costs, fees of expert witnesses, private investigators and
professional advisors (including, without limitation, accountants and investment
bankers), travel expenses, duplicating costs, printing and binding costs, costs
of preparation of demonstrative evidence and other courtroom presentation aids
and devices, costs incurred in connection with document review, organization,
imaging and computerization, telephone charges, postage, delivery service fees,
and all other disbursements, costs or expenses of the type customarily incurred
in connection with prosecuting, defending, preparing to prosecute or defend,
investigating, being or preparing to be a witness in, settling or otherwise
participating in, a Proceeding;
(f) "Corporate Status" describes the status of a person who (i) in the case
of a Director, is or was a director of the Corporation and is or was acting in
such capacity, (ii) in the case of an Officer, is or was an officer, employee,
trustee or agent of the Corporation or is or was a director, officer, employee
or agent of any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise which such Officer is or was serving at the
request of the Corporation, and (iii) in the case of a Non-Officer Employee, is
or was an employee of the Corporation or is or was a director, officer, employee
or agent of any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise which such Non-Officer Employee is or was
serving at the request of the Corporation. For purposes of
14
<PAGE>
subsection (ii) of this Section 1(f), an officer or director of the Corporation
who is serving as a director, partner, trustee, officer, employee or agent of a
Subsidiary shall be deemed to be serving at the request of the Corporation;
(g) "Disinterested Director" means, with respect to each Proceeding in
respect of which indemnification is sought hereunder, a Director of the
Corporation who is not and was not a party to such Proceeding; and
(h) "Subsidiary" shall mean any corporation, partnership, limited liability
company, joint venture, trust or other entity of which the Corporation owns
(either directly or through or together with another Subsidiary of the
Corporation) either (i) a general partner, managing member or other similar
interest or (ii) (A) 50% or more of the voting power of the voting capital
equity interests of such corporation, partnership, limited liability company,
joint venture or other entity, or (B) 50% or more of the outstanding voting
capital stock or other voting equity interests of such corporation, partnership,
limited liability company, joint venture or other entity.
SECTION 2. Indemnification of Directors and Officers. Subject to the
-----------------------------------------
operation of Section 4 of this Article V, each Director and Officer shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the DGCL, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than such law
permitted the Corporation to provide prior to such amendment) against any and
all Expenses, judgments, penalties, fines and amounts reasonably paid in
settlement that are incurred by such Director or Officer or on such Director's
or Officer's behalf in connection with any threatened, pending or completed
Proceeding or any claim, issue or matter therein, which such Director or Officer
is, or is threatened to be made, a party to or participant in by reason of such
Director's or Officer's Corporate Status, if such Director or Officer acted in
good faith and in a manner such Director or Officer reasonably believed to be in
or not opposed to the best interests of the Corporation and, with respect to any
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The rights of indemnification provided by this Section 2 shall
continue as to a Director or Officer after he or she has ceased to be a Director
or Officer and shall inure to the benefit of his or her heirs, executors,
administrators and personal representatives. Notwithstanding the foregoing, the
Corporation shall indemnify any Director or Officer seeking indemnification in
connection with a Proceeding initiated by such Director or Officer only if such
Proceeding was authorized by the Board of Directors of the Corporation, unless
such Proceeding was brought to enforce an Officer or Director's rights to
Indemnification under these by-laws.
SECTION 3. Indemnification of Non-Officer Employees. Subject to the
----------------------------------------
operation of Section 4 of this Article V, each Non-Officer Employee may, in the
discretion of the Board of Directors of the Corporation, be indemnified by the
Corporation to the fullest extent authorized by the DGCL, as the same exists or
may hereafter be amended, against any or all Expenses,
15
<PAGE>
judgments, penalties, fines and amounts reasonably paid in settlement that are
incurred by such Non-Officer Employee or on such Non-Officer Employee's behalf
in connection with any threatened, pending or completed Proceeding, or any
claim, issue or matter therein, which such Non-Officer Employee is, or is
threatened to be made, a party to or participant in by reason of such Non-
Officer Employee's Corporate Status, if such Non-Officer Employee acted in good
faith and in a manner such Non-Officer Employee reasonably believed to be in or
not opposed to the best interests of the Corporation and, with respect to any
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The rights of indemnification provided by this Section 3 shall exist
as to a Non-Officer Employee after he or she has ceased to be a Non-Officer
Employee and shall inure to the benefit of his or her heirs, personal
representatives, executors and administrators. Notwithstanding the foregoing,
the Corporation may indemnify any Non-Officer Employee seeking indemnification
in connection with a Proceeding initiated by such Non-Officer Employee only if
such Proceeding was authorized by the Board of Directors of the Corporation.
SECTION 4. Good Faith. Unless ordered by a court, no indemnification
----------
shall be provided pursuant to this Article V to a Director, to an Officer or to
a Non-Officer Employee unless a determination shall have been made that such
person acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interests of the Corporation and, with respect to
any criminal Proceeding, such person had no reasonable cause to believe his or
her conduct was unlawful. Such determination shall be made by (a) a majority
vote of the Disinterested Directors, even though less than a quorum of the Board
of Directors, (b) a committee comprised of Disinterested Directors, such
committee having been designated by a majority vote of the Disinterested
Directors (even though less than a quorum), (c) if there are no such
Disinterested Directors, or if a majority of Disinterested Directors so directs,
by independent legal counsel in a written opinion, or (d) by the stockholders of
the Corporation.
SECTION 5. Advancement of Expenses to Directors Prior to Final
---------------------------------------------------
Disposition. The Corporation shall advance all Expenses incurred by or on behalf
- -----------
of any Director in connection with any Proceeding in which such Director is
involved by reason of such Director's Corporate Status within ten (10) days
after the receipt by the Corporation of a written statement from such Director
requesting such advance or advances from time to time, whether prior to or after
final disposition of such Proceeding. Such statement or statements shall
reasonably evidence the Expenses incurred by such Director and shall be preceded
or accompanied by an undertaking by or on behalf of such Director to repay any
Expenses so advanced if it shall ultimately be determined that such Director is
not entitled to be indemnified against such Expenses.
SECTION 6. Advancement of Expenses to Officers and Non-Officer Employees
-------------------------------------------------------------
Prior to Final Disposition.
- --------------------------
16
<PAGE>
(a) Advancement to Officers. The Corporation may, at the discretion of the
-----------------------
Board of Directors of the Corporation, advance any or all Expenses incurred by
or on behalf of any Officer in connection with any Proceeding in which such is
involved by reason of such Officer's Corporate Status upon the receipt by the
Corporation of a statement or statements from such Officer requesting such
advance or advances from time to time, whether prior to or after final
disposition of such Proceeding. Such statement or statements shall reasonably
evidence the Expenses incurred by such Officer and shall be preceded or
accompanied by an undertaking by or on behalf of such to repay any Expenses so
advanced if it shall ultimately be determined that such Officer is not entitled
to be indemnified against such Expenses.
(b) Advancement to Non-Officer Employees. The Corporation may, at the
------------------------------------
discretion of the Board of Directors or of any Officer who is authorized to act
on behalf of the Corporation, advance any or all Expenses incurred by or on
behalf of any Non-Officer Employee in connection with any Proceeding in which
such Non-Officer Employee is involved by reason of such Non-Officer Employee's
Corporate Status upon the receipt by the Corporation of a statement or
statements from such Non-Officer Employee requesting such advance or advances
from time to time, whether prior to or after final disposition of such
Proceeding. Such statement or statements shall reasonably evidence the Expenses
incurred by such Non-Officer Employee and shall be preceded or accompanied by an
undertaking by or on behalf of such Non-Officer Employee to repay any Expenses
so advanced if it shall ultimately be determined that such Non-Officer Employee
is not entitled to be indemnified against such Expenses.
SECTION 7. Contractual Nature of Rights. The foregoing provisions of this
----------------------------
Article V shall be deemed to be a contract between the Corporation and each
Director and Officer entitled to the benefits hereof at any time while this
Article V is in effect, and any repeal or modification thereof shall not affect
any rights or obligations then existing with respect to any state of facts then
or theretofore existing or any Proceeding theretofore or thereafter brought
based in whole or in part upon any such state of facts. If a claim for
indemnification or advancement of Expenses hereunder by a Director or Officer is
not paid in full by the Corporation within (a) 60 days after receipt by the
Corporation's of a written claim for indemnification, or (b) in the case of a
Director, 10 days after receipt by the Corporation of documentation of Expenses
and the required undertaking, such Director or Officer may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim, and if successful in whole or in part, such Director or Officer shall
also be entitled to be paid the expenses of prosecuting such claim. The failure
of the Corporation (including its Board of Directors or any committee thereof,
independent legal counsel, or stockholders) to make a determination concerning
the permissibility of such indemnification or, in the case of a Director,
advancement of Expenses, under this Article V shall not be a defense to the
action and shall not create a presumption that such indemnification or
advancement is not permissible.
SECTION 8. Non-Exclusivity of Rights. The rights to indemnification and
-------------------------
advancement of Expenses set forth in this Article V shall not be exclusive of
any other right
17
<PAGE>
which any Director, Officer, or Non-Officer Employee may have or hereafter
acquire under any statute, provision of the Certificate or these By-laws,
agreement, vote of stockholders or Disinterested Directors or otherwise.
SECTION 9. Insurance. The Corporation may maintain insurance, at its
---------
expense, to protect itself and any Director, Officer or Non-Officer Employee
against any liability of any character asserted against or incurred by the
Corporation or any such Director, Officer or Non-Officer Employee, or arising
out of any such person's Corporate Status, whether or not the Corporation would
have the power to indemnify such person against such liability under the DGCL or
the provisions of this Article V.
ARTICLE VI
----------
Miscellaneous Provisions
------------------------
SECTION 1. Fiscal Year. Except as otherwise determined by the Board of
-----------
Directors, the fiscal year of the Corporation shall end on the last day of
December of each year.
SECTION 2. Seal. The Board of Directors shall have power to adopt and
----
alter the seal of the Corporation.
SECTION 3. Execution of Instruments. All deeds, leases, transfers,
------------------------
contracts, bonds, notes and other obligations to be entered into by the
Corporation in the ordinary course of its business without director action may
be executed on behalf of the Corporation by the Chairman of the Board, if one is
elected, the President or the Treasurer or any other officer, employee or agent
of the Corporation as the Board of Directors or Executive Committee may
authorize.
SECTION 4. Voting of Securities. Unless the Board of Directors otherwise
--------------------
provides, the Chairman of the Board, if one is elected, the President or the
Treasurer may waive notice of and act on behalf of this Corporation, or appoint
another person or persons to act as proxy or attorney in fact for this
Corporation with or without discretionary power and/or power of substitution, at
any meeting of stockholders or shareholders of any other corporation or
organization, any of whose securities are held by this Corporation.
SECTION 5. Resident Agent. The Board of Directors may appoint a resident
--------------
agent upon whom legal process may be served in any action or proceeding against
the Corporation.
SECTION 6. Corporate Records. The original or attested copies of the
-----------------
Certificate, By-laws and records of all meetings of the incorporators,
stockholders and the Board of Directors and the stock transfer books, which
shall contain the names of all stockholders, their record addresses and the
amount of stock held by each, may be kept outside the State of Delaware and
shall be kept at the principal office of the Corporation, at the office of its
18
<PAGE>
counsel or at an office of its transfer agent or at such other place or places
as may be designated from time to time by the Board of Directors.
SECTION 7. Certificate. All references in these By-laws to the
-----------
Certificate shall be deemed to refer to the Amended and Restated Certificate of
Incorporation of the Corporation, as amended and in effect from time to time.
SECTION 8. Amendment of By-laws.
--------------------
(a) Amendment by Directors. Except as provided otherwise by law, these
----------------------
By-laws may be amended or repealed by the Board of Directors by the affirmative
vote of a majority of the Directors then in office.
(b) Amendment by Stockholders. These By-laws may be amended or repealed
-------------------------
at any Annual Meeting, or special meeting of stockholders called for such
purpose, by the affirmative vote of at least two-thirds of the shares present in
person or represented by proxy at such meeting and entitled to vote on such
amendment or repeal, voting together as a single class; provided, however, that
if the Board of Directors recommends that stockholders approve such amendment or
repeal at such meeting of stockholders, such amendment or repeal shall only
require the affirmative vote of the majority of the shares present in person or
represented by proxy at such meeting and entitled to vote on such amendment or
repeal, voting together as a single class. Notwithstanding the foregoing,
stockholder approval shall not be required unless mandated by the Certificate,
these By-laws, or other applicable law.
Adopted October___, 1999 and effective as of October ____, 1999.
19
<PAGE>
Exhibit 5.1
October 27, 1999
Plug Power Inc.
968 Albany-Shaker Road
Latham, New York 12110
Ladies and Gentlemen:
We have acted as counsel to Plug Power Inc., a Delaware corporation (the
"Company"), in connection with the offer and sale by the Company of up to
6,900,000 shares of common stock, par value $.01 per share ("Common Stock"), of
the Company (the "Shares"). The Shares include an overallotment option of up to
900,000 shares of Common Stock. This opinion is being delivered in connection
with the Company's Registration Statement on Form S-1 (No. 333-86089) (the
"Registration Statement") relating to the registration of the offering and sale
of the Shares under the Securities Act of 1933, as amended (the "Securities
Act"). All of the Shares are to be sold by the Company to the several
underwriters (the "Underwriters") of which Goldman, Sachs & Co., Hambrecht &
Quist, Merrill Lynch & Co., and FAC/Equities are the representatives (the
"Representatives") pursuant to an Underwriting Agreement (the "Underwriting
Agreement") to be entered into between the Company and the Representatives of
the Underwriters.
In connection with rendering this opinion, we have examined the form of the
proposed Underwriting Agreement being filed as an Exhibit to the Registration
Statement; the Certificate of Incorporation and By-laws of the Company, each as
amended to date; such records of the corporate proceedings of the Company as we
deemed material; and such other certificates, receipts, records and documents as
we considered necessary for the purpose of this opinion. In our examination, we
have assumed the genuineness of all signatures, the legal capacity of natural
persons, the authenticity of all documents submitted to us as certified,
photostatic or facsimile copies, the authenticity of the originals of such
copies and the authenticity of telephonic confirmations of public materials. As
to facts material to our opinion, we have relied upon certificates or telephonic
confirmations of public officials and certificates, documents, statements and
other information of the Company or representatives or officers thereof.
We are attorneys admitted to practice in The Commonwealth of Massachusetts.
We express no opinion concerning the laws of any jurisdictions other than the
laws of the United States of America, the laws of The Commonwealth of
Massachusetts and the laws of the State of Delaware.
Based upon the foregoing, we are of the opinion that when (i) the
Underwriting Agreement is completed (including the insertion therein of pricing
terms) and executed and delivered by the Company and on the behalf of the
Underwriters, and (ii) the Shares are sold to the Underwriters and paid pursuant
to the terms of the Underwriting Agreement, the Shares will be duly
<PAGE>
authorized, validly issued and fully paid and non-assessable by the Company.
The foregoing assumes that all requisite steps will be taken to comply with
the requirements of the Securities Act and applicable requirements of state laws
regulating the offer and sale of securities.
We hereby consent to being named as counsel to the Company in the
Registration Statement, to the references therein to our firm under the caption
"Legal Matters" and to the inclusion of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
GOODWIN, PROCTER & HOAR LLP
<PAGE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
EXHIBIT 10.1
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
GE FUEL CELL SYSTEMS, L.L.C.
between
GE ON-SITE POWER, INC.
and
PLUG POWER, L.L.C.
dated
February 3, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS 1
Section 1.1 Definitions 1
ARTICLE II ORGANIZATION 1
Section 2.1 Formation; Name 1
Section 2.2 Certificate of Formation; Foreign Qualification 1
Section 2.3 No State Law Partnership; Liability to Third Parties 2
Section 2.4 Registered Office 2
Section 2.5 Representations and Warranties of the Members 2
ARTICLE III PURPOSES AND POWERS; TERM OF COMPANY 2
Section 3.1 Purposes and Powers 2
Section 3.2 Scope 2
Section 3.3 Term 2
ARTICLE IV MEMBERSHIP, DISPOSITIONS OF INTERESTS AND BANKRUPT MEMBER 2
Section 4.1 Members 2
Section 4.2 Additional Members 3
Section 4.3 Withdrawal 3
Section 4.4 Disposition of a Membership Interest 3
ARTICLE V CAPITAL CONTRIBUTIONS 5
Section 5.1 Initial Contributions 5
Section 5.2 Additional Members 5
Section 5.3 Guarantees 5
Section 5.4 Return of Contributions 5
Section 5.5 Member Affiliate Loans 6
ARTICLE VI PROFITS, LOSSES, ACCOUNTING, TAXES AND DISTRIBUTIONS 6
Section 6.1 Allocation of Profits and Losses 6
Section 6.2 Books; Fiscal Year 6
Section 6.3 Capital Accounts 7
Section 6.4 Tax Returns 8
Section 6.5 Tax Matters Partner 8
Section 6.6 Distributions 8
Section 6.7 Withdrawals 8
ARTICLE VII MANAGEMENT; CONDUCT OF BUSINESS 9
Section 7.1 Management by Committee 9
Section 7.2 Establishment of the Committee 9
Section 7.3 Officers 10
</TABLE>
-i-
<PAGE>
<TABLE>
Page
----
<S> <C>
Section 7.4 Conduct of Business 10
Section 7.5 Conflicts of Interest 11
Section 7.6 Employment and Secondment Matters 11
ARTICLE VIII MEETINGS OF THE COMMITTEE 11
Section 8.1 Regular and Special Meetings 11
Section 8.2 Notices of Meetings 11
Section 8.3 Quorum 11
Section 8.4 Action by Written Consent or Telephone Conference 11
Section 8.5 Substitute Committee Members 12
ARTICLE IX ADDITIONAL COVENANTS 12
Section 9.1 Public Announcements, Etc. 12
Section 9.2 Confidentiality 12
Section 9.3 Protection of Business 13
Section 9.4 Promotion of the Company 14
Section 9.5 Ethical and Environmental Standards 14
Section 9.6 Tax Matters 14
Section 9.7 Other Covenants 15
Section 9.8 Further Assurances 15
Section 9.9 Ancillary Agreements 15
ARTICLE X DEADLOCK; TERMINATION OF THIS LLC AGREEMENT 15
Section 10.1 Resolution of Disputes 15
Section 10.2 Termination 16
Section 10.3 Effect of Termination 16
Section 10.4 Survival of Representations and Warranties 16
Section 10.5 Indemnifiable Claims 16
ARTICLE XI DISSOLUTION, LIQUIDATION AND TERMINATION OF THE COMPANY 18
Section 11.1 Dissolution 18
Section 11.2 Liquidation and Termination 18
Section 11.3 Payment of Debts 18
Section 11.4 Debts to Members 19
Section 11.5 Remaining Distribution 19
Section 11.6 Reserve 19
Section 11.7 Final Accounting 19
ARTICLE XII MISCELLANEOUS 20
Section 12.1 Relationship of the Parties 20
Section 12.2 Performance by the Company 20
Section 12.3 Agreement for Further Execution 20
Section 12.4 Notices 20
</TABLE>
-ii-
<PAGE>
<TABLE>
Page
----
<S> <C>
Section 12.5 Amendments; No Waivers 21
Section 12.6 Successors and Assigns 21
Section 12.7 Governing Law 21
Section 12.8 Illegality and Severability 21
Section 12.9 Counterparts; Effectiveness 21
Section 12.10 Entire Agreement 22
Section 12.11 Captions 22
Section 12.12 Expenses 22
Section 12.13 Limitation of Liability 22
ANNEX A Definitions
ANNEX B Representations and Warranties of the Members
ANNEX C Employment and Secondment Matters
PP Disclosure Schedule
GEOSP Disclosure Schedule
EXHIBIT 1 Membership Interests
EXHIBIT 2 Allocation and Capital Account Provisions
EXHIBIT 3 Strategic Plan and 1999 Operating Plan
EXHIBIT 4 GE Company Policies
EXHIBIT 5 Form of Contribution Agreement
EXHIBIT 6 Form of Promissory Note and Security Agreement
EXHIBIT 7 Form of GE Trademark and Tradename Agreement
EXHIBIT 8 Form of PP Trademark Agreement
EXHIBIT 9 Form of Distributor Agreement
</TABLE>
-iii-
<PAGE>
Exhibit 10.1
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
GE FUEL CELL SYSTEMS, L.L.C.
A Delaware Limited Liability Company
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this
"LLC Agreement") is made and entered into on the 3rd day of February, 1999, by
and between GE ON-SITE POWER, INC., a Delaware corporation ("GEOSP"), a wholly
owned subsidiary of GENERAL ELECTRIC COMPANY ("GE"), which is controlled by GE's
Power Systems business ("GEPS"), having offices at One River Road, Schenectady,
New York 12345, and PLUG POWER, L.L.C., a Delaware limited liability company
("PP"), having offices at 968 Albany-Shaker Road, Latham, New York 12110 (GEOSP
and PP, collectively the "Members" and each individually, a "Member"), to join
together to operate a limited liability company under the laws of the State of
Delaware for the purposes and upon the terms and conditions set forth in this
LLC Agreement.
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Capitalized terms used in this LLC
-----------
Agreement shall have the meanings specified herein or in Annex A.
ARTICLE II
ORGANIZATION
Section 2.1 Formation; Name. The Members hereby enter into this LLC
---------------
Agreement for the purpose of setting forth the rights and obligations of the
Members. The name of the Company shall be GE Fuel Cell Systems, L.L.C.
Section 2.2 Certificate of Formation; Foreign Qualification. GEOSP
-----------------------------------------------
has caused to be filed for record the Certificate of Formation of the Company in
the offices of the Secretary of State of the State of Delaware in accordance
with (S) 18-201 of the Act. GEOSP shall file such amendments and other documents
necessary to give effect to this LLC Agreement. Prior to the Company's
conducting business in any jurisdiction other than the State of Delaware, the
Members shall cause the Company to comply, to the extent procedures are
available and those matters are reasonably within the control of the Members,
with all requirements necessary to qualify the Company as a foreign limited
liability company in that jurisdiction. Each Member shall execute, acknowledge,
swear to, and deliver all certificates and other instruments conforming with
this LLC Agreement that are necessary or appropriate to qualify, continue and
terminate the Company as a foreign limited liability company in all such
jurisdictions in which the Company may conduct business.
-1-
<PAGE>
Section 2.3 No State Law Partnership; Liability to Third Parties.
----------------------------------------------------
The Members intend that the Company not be a partnership (including, without
limitation, a limited partnership), and that no Member be a partner or joint
venturer of any other Member, for any purposes other than federal and state tax
purposes, and that this LLC Agreement not be construed otherwise. No Member
shall be liable for the debts, obligations or liabilities of the Company,
including under a judgment, decree or order of a court, except for the
obligation to fund the working capital needs of the Company as set forth in
Article V of this LLC Agreement.
Section 2.4 Registered Office. The registered office and principal
-----------------
place of business of the Company shall be located at 1 River Road, Schenectady,
New York 12345, and the Company will also operate at such other places as it may
determine.
Section 2.5 Representations and Warranties of the Members. Each
---------------------------------------------
Member represents and warrants to the other Member, as of the date of execution
of this LLC Agreement, as set forth in Annex B, except as set forth in the
applicable Disclosure Schedule.
ARTICLE III
PURPOSES AND POWERS; TERM OF COMPANY
Section 3.1 Purposes and Powers. The Company has been formed for the
-------------------
sole purpose of marketing and selling (as a distributor), in the Territory,
Products, Pre-Commercial Units, and Test & Evaluation Units and performing
Services in the Territory. The Company's business shall be limited to that which
is described in this Section 3.1 and in Section 3.2 and any incidental
activities. In furtherance of such business, the Company shall have all of the
powers granted to a limited liability company under the laws of the State of
Delaware, including, without limitation, the powers specifically enumerated in
(S) 18-106 of the Act.
Section 3.2 Scope. The Company will purchase, from PP, Products,
-----
Pre-Commercial Units, Test & Evaluation Units, and such other PP products that
the Members mutually agree to be marketed and sold, and will purchase Services
from PP, GE and third parties as needed, in order to provide high quality,
Products, Pre-Commercial Units, Test & Evaluation Units, such other PP products
that the Members mutually agree to be marketed and sold, and Services in the
Territory. The Company will hire or contract necessary manpower for distributing
Products, Pre-Commercial Units, Test & Evaluation Units, and such other PP
products that the Members mutually agree to be marketed and sold, and for
providing Services, in accordance with the Strategic Plan and the Distributor
Agreement.
Section 3.3 Term. The Company as constituted in this LLC Agreement
----
shall continue until dissolved or terminated pursuant to law or the provisions
of this LLC Agreement.
ARTICLE IV
MEMBERSHIP, DISPOSITIONS OF INTERESTS AND
BANKRUPT MEMBER
Section 4.1 Members. PP shall be admitted to the Company as a Member
-------
of the Company effective as of the execution of this LLC Agreement. The Members
will then have the Membership Interests set forth on Exhibit 1.
-2-
<PAGE>
Section 4.2 Additional Members. Additional Persons may be admitted
------------------
to the Company as Members and Membership Interests may be created and issued to
those Persons with the approval of five (5) members of the Committee on such
terms and conditions as the Committee may determine at the time of admission.
The terms of admission or issuance must specify the Capital Contribution and
Membership Interest applicable thereto and may provide for the creation of
different classes or groups of Members having different rights, powers and
duties. Any such admission shall be effective only after the new Member has
executed and delivered to the Committee a document including the new Member's
notice address and its agreement to be bound by this LLC Agreement, with
representations and warranties effective as of the date of such new Member's
execution of such document. Upon the admission of new Members, Exhibits 1 and 2
shall be amended by the Committee to reflect the new Membership Interests and
allocation and capital account provisions.
Section 4.3 Withdrawal. Except as set forth in this LLC Agreement, a
----------
Member does not have the right or power to withdraw from the Company as a
Member.
Section 4.4 Disposition of a Membership Interest.
------------------------------------
(a) Prohibition. No Membership Interest, or any right, title or
-----------
interest in or to such Membership Interest, now or hereafter owned, held or
acquired by any Member shall be Disposed of voluntarily, involuntarily, by
operation of law, with or without consideration, or otherwise except in
accordance with the provisions of this Section 4.4. Any Disposition which does
not comply with the provisions of this Section 4. 4 shall be void ab initio and
-- ------
the Company shall not give effect to such attempted Disposition in its records.
(b) Affiliates; Sale of Business. Any Member may Dispose of all
----------------------------
(but not less than all) of its right, title and interest in and to a Membership
Interest as follows: (i) to an Affiliate of such Member, provided that such
Affiliate is not a GEPS Competitor, (ii) by GEOSP to the purchaser, directly or
indirectly, of GEOSP or GEPS (or substantially all of the assets of GEOSP or
GEPS), or (iii) by PP to the purchaser, directly or indirectly, of PP (or
substantially all of the assets o f PP); provided, however, that any Disposition
-------- -------
pursuant to this clause (b) shall be made in compliance with the requirements of
clauses (d), (e) and (f). GEOSP and PP shall remain responsible for the
performance of this LLC Agreement by each Affiliate of such party to which a
Membership Interest is transferred pursuant to this Section 4.4(b). If any
Affiliate to which a Membership Interest is transferred pursuant to this Section
4.4 ceases to be an Affiliate of the Member from which it acquired such
Membership Interest, such Person shall re-convey such Membership Interest to
such transferring Member promptly upon such Person ceasing to be such an
Affiliate (unless such Person ceases to be such an Affiliate in connection with
a transfer otherwise permitted by this Section 4.4).
(c) GEOSP Option to Purchase.
------------------------
(i) PP may, without restriction, Dispose of all or part of PP to a
purchaser that is not a GEPS Competitor, and the provisions of
this Section 4.4(c) shall not apply in the case of an initial
public offering of securities by PP. Notwithstanding the
provisions of Section 4.4(b), if: there is a proposal to Dispose,
directly or indirectly, of an interest in PP (by merger, sale of
stock or assets thereof or otherwise), including its
-3-
<PAGE>
interest in the Company ("PP Interest"), to a GEPS Competitor,
then PP shall provide prompt written notice (the "Transfer
Notice") to GEOSP. The Transfer Notice shall identify the
Person with which such transaction is proposed to be
consummated and all other material terms of the proposed
transaction, including the consideration to be paid for the PP
Interest, and, in the case of an offer in which the
consideration payable for the PP Interest consists in whole or
in part of consideration other than cash, such information
relating to such other consideration as is reasonably necessary
for GEOSP to be informed of all material facts relating to such
consideration.
(ii) GEOSP shall have the right and option, for a period of 30 days
after the date on which all information required to be provided
to GEOSP has been so provided (the "Notice Period"), to deliver
a notice to PP (the "Purchase Notice") of GEOSP's intention to
purchase the PP Interest. The consideration to be paid by GEOSP
for the PP Interest shall be cash in an amount equal to the
price to be paid for the PP Interest by the proposed purchaser
thereof. Notwithstanding the preceding sentence, if the
consideration to be paid for the PP Interest is wholly or
partially non-cash consideration, then GEOSP shall pay cash in
lieu of the non-cash consideration, in an amount equal to the
fair market value thereof, such amount to be determined by good
faith negotiations between the Members (and, in the absence of
agreement, using a procedure similar to that used to determine
the Fair Market Value of an Interest in the Company). Delivery
of the Purchase Notice by GEOSP shall constitute an irrevocable
election by GEOSP to purchase the PP Interest for the
consideration and on the other terms and conditions set forth
in the proposed transaction and in this Section 4.4(c).
(iii) The transfer of the PP Interest to GEOSP shall be consummated
as soon as practicable following the giving of the Purchase
Notice by GEOSP, but in no event more than 30 days thereafter
(subject to any extension necessary to comply with any
applicable regulatory requirement). If at the end of the Notice
Period GEOSP shall not have given a Purchase Notice with
respect to the PP Interest, GEOSP will be deemed to have waived
its rights under this Section 4.4(c) with respect to the
Disposition contemplated by the Transfer Notice. If GEOSP
rejects the Transfer Notice, or is deemed to have waived its
rights as set forth in the preceding sentence, PP shall have
the right, for a period of 180 days following such rejection or
waiver (subject to any extension necessary to comply with any
applicable regulatory requirement), to dispose of the PP
Interest to the proposed transferee identified in the Transfer
Notice and on terms no more favorable to the proposed
transferee than are set forth in the Transfer Notice. If, at
the end of the 180-day period following the rejection or
waiver, PP has not completed the sale of the PP Interest, such
Disposition may not occur and PP and the PP Interest shall
again be subject to the restrictions contained in this Section
4.4(c).
(d) Delivery to the Company. The Company shall not recognize for
-----------------------
any purpose any purported Disposition of a Membership Interest unless and until
all applicable laws, including securities laws,
-4-
<PAGE>
with respect to the Disposition have been complied with and the other applicable
provisions of this Section 4.4 have been satisfied and the Committee has
received, on behalf of the Company, a document (i) executed by both the Member
effecting the Disposition and the Person to which the Membership Interest is
transferred, (ii) including the notice address of any Person to be admitted to
the Company as a Substitute Member and such Person's agreement to be bound by
this LLC Agreement in respect of the Membership Interest being obtained, (iii)
setting forth the Membership Interest after the Disposition of the Member
effecting the Disposition and the Person to which the Membership Interest is
transferred, and (iv) containing a warranty and representation that the
Disposition was made in accordance with all applicable laws and regulations.
Each Disposition and, if applicable, admission complying with the provisions of
this Section 4.4(d) shall be effective as of the first day of the calendar month
immediately succeeding the month in which the requirements of this Section 4.4
have been met.
(e) Status as a Member. Upon compliance with the other applicable
------------------
requirements of this Section 4.4, the transferee shall be deemed a "Member" for
the purposes of this LLC Agreement and a party to this LLC Agreement, and shall
have the rights and be subject to the obligations of a Member hereunder and a
party hereto with respect to the Membership Interest held by such transferee.
(f) Costs. The Member effecting a Disposition and any Person
-----
admitted as a Substitute Member in connection therewith shall pay, or reimburse
the Company for, all reasonable costs incurred by the Company in connection with
the Disposition (including, without limitation, any legal fees incurred in
connection with the consideration of the implications thereof under applicable
securities laws, the Code and other laws) on or before the tenth day after the
receipt by that Person of the Company's invoice for the amount due.
ARTICLE V
CAPITAL CONTRIBUTIONS
Section 5.1 Initial Contributions. GEOSP has previously contributed
---------------------
$10,000 cash to the capital of the Company.
Section 5.2 Additional Members. Each Additional Member shall make
------------------
the Capital Contribution determined by the Members to be made by such Additional
Member at the time such Additional Member is admitted as a Member of the Company
in accordance with Section 4.2 of this LLC Agreement.
Section 5.3 Guarantees. Should guarantees be required by Customers
----------
to support the contracts entered into by the Company, then the Company shall, to
the extent reasonably possible, arrange such guarantees with its own resources.
Where necessary, and subject to mutual written agreement on a case by case
basis, the Members may, but shall not be obligated to, guarantee the contracts
in proportion to their respective interests in the Company.
Section 5.4 Return of Contributions. No Member is entitled to the
-----------------------
return of any part of its Capital Contributions or to interest in respect of
either its Capital Account or its Capital Contributions. An unreturned Capital
Contribution is not a liability of the Company or of any Member.
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<PAGE>
Section 5.5 Member Affiliate Loans.
----------------------
(a) GEOSP shall arrange for its Affiliate, GE, to provide, during the
period ending December 31, 2000, in the form of loans to the Company (i) capital
to fund the Company's purchase of $10,250,000 of Pre-Commercial Units in
accordance with the Distributor Agreement, and (ii) additional capital as
required to fund the Company's operations, in accordance with the Distributor
Agreement, in an amount not to exceed $8,000,000. The loans shall be made to the
Company pursuant to the terms of a non-recourse promissory note substantially in
the form attached to this LLC Agreement as Exhibit 6. The loans referred to in
this subsection (b) shall be conditioned upon (i) PP's materially complying with
the terms and conditions of the Distributor Agreement so that no event of
termination thereunder has occurred, and (ii) PP's remaining on schedule for a
January 1, 2001 commercial release of the Products. Within 60 days of the
effective date of this Agreement, the Members will mutually agree to a product
development schedule for the period ending December 31, 2000, that will include
milestones and objective measures of progress towards the January 1, 2001
Product release. The Members will meet not less than quarterly for the purpose
of evaluating PP's compliance with the product development schedule. In the
event that GEOSP determines, in good faith, that PP is not in material
compliance with the product development schedule, GEOSP may after 120 days'
written notice to PP (with such notice not to be given earlier than January 1,
2000), terminate this LLC Agreement if such noncompliance remains uncured.
(b) In the event that further capital, in addition to that referred to
in subsection (a) above, is required by the Company in order to meet any
obligation or pay any liability of the Company, the Company may borrow such
required capital from any Person, including any Member or any Affiliate of a
Member, on such commercially reasonable terms as the Committee may determine;
provided, that the Company shall offer to the Members the opportunity to lend
such funds on such commercially reasonable terms pro rata in proportion to their
respective Membership Interests. Any such transactions with Members or their
Affiliates are subject to Section 7.1(b).
ARTICLE VI
PROFITS, LOSSES, ACCOUNTING, TAXES AND
DISTRIBUTIONS
Section 6.1 Allocation of Profits and Losses. Except as otherwise
--------------------------------
provided in and subject to the provisions of Exhibit 2 to this LLC Agreement,
Profits (including items of income and gain) and Losses (including items of
expense, deduction and loss) of the Company for each Fiscal Year shall be
determined as of the end of the Fiscal Year and shall be allocated to each
Member pro rata in accordance with its Membership Interest.
Section 6.2 Books; Fiscal Year.
------------------
(a) The Company shall maintain or cause to be maintained proper and
complete books and records in which shall be entered fully and accurately all
transactions and other matters relating to the Company's business in the detail
and completeness customary and usual for businesses of the type engaged in by
the Company. The Company's financial statements shall be kept on the accrual
basis and in accordance with GE General Accounting Policies (as they may be
modified from time to time) and GAAP, consistently applied. The Company's
financial statements shall be audited annually by independent public
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
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<PAGE>
accountants selected by the Committee. The fact that such independent public
accountants may audit the financial statements of one or more of the Members or
their Affiliates shall not disqualify such accountants from auditing the
Company's financial statements.
(b) The fiscal year of the Company (the "Fiscal Year") shall be the
calendar year (or such other 12-month period as the Committee may select) or, if
applicable, that shorter period within the calendar year (or such other period)
during which the Company had legal existence.
(c) The Company shall prepare and distribute to each Member
unaudited quarterly financial statements (including, without limitation, current
Capital Account balances), prepared in accordance with Section 6.2(a). Such
quarterly financial statements shall be distributed to the Members within a time
that will permit, and shall provide such information concerning the operations
of the Company as may be required for, the Members to prepare and timely file
with the Securities and Exchange Commission their quarterly financial
statements.
(d) At a minimum, the Company shall keep at its principal executive
office such books and records as may be required by the Act and such other books
and records as are customary and usual for businesses of the type engaged in by
the Company.
(e) Each Member or its duly authorized representatives shall have
the right, during normal business hours and in accordance with the Act, to
inspect and copy the Company's books and records at the requesting Member's
expense.
Section 6.3 Capital Accounts.
----------------
(a) There shall be maintained a Capital Account for each Member in
accordance with this Section 6.3 and the principles set forth in Exhibit 2
attached to this LLC Agreement. The amount of cash or the fair market value of
property contributed to the Company by each Member (including the property
deemed contributed to the Company by PP pursuant to Section 3 of the
Contribution Agreement), net of liabilities assumed by the Company from such
Member or to which the contributed property is subject, shall be credited to
such Member's Capital Account, and from time to time, but not less often than at
the end of each Fiscal Year, the allocations to each Member of Profits and
Losses (including any special allocations made pursuant to the provisions of
Exhibit 2) and the fair market value of property distributed to each Member, net
of liabilities assumed by the Member or to which the property distributed is
subject, shall be credited or debited to such Member's Capital Account. The
determination of Members' Capital Accounts, and any adjustments thereto, shall
be made consistent with tax accounting and other principles set forth in Section
704(b) of the Code and the applicable regulations thereunder.
(b) Except as otherwise specifically provided in this LLC Agreement
or any Ancillary Agreement, no Member shall be required to make any further
contribution to the capital of the Company to restore a loss, to discharge any
liability of the Company or for any other purpose, nor shall any Member
personally be liable for any liabilities of the Company or of any other Member,
except as provided by law.
(c) Immediately following a permitted transfer of any Membership
Interest, the Capital Account of the transferee Member shall equal the Capital
Account of the transferor Member attributable to the
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<PAGE>
transferred Membership Interest and such Capital Account shall not be adjusted
to reflect any basis adjustment under Section 743 of the Code.
(d) For purposes of computing the amount of any item of income,
gain, deduction or loss to be reflected in the Members' Capital Accounts, the
determination, recognition and classification of any such item shall be the same
as its determination, recognition and classification for federal income tax
purposes, taking into account any adjustments required pursuant to Section
704(b) of the Code and the applicable regulations thereunder as more fully
described in Exhibit 2.
Section 6.4 Tax Returns. The Members, through the Committee, shall
-----------
cause to be prepared and filed all necessary federal and state income tax
returns for the Company. Such tax returns shall be prepared by the Tax Matters
Partner, as defined in Section 6.5. In preparing the tax returns for the
Company, the Tax Matters Partner shall at all times act reasonably and in good
faith taking into account the interests of all Members. The Tax Matters Partner
shall permit any Member upon request reasonable opportunity to review the
content of all tax returns at least 45 days prior to filing. The Tax Matters
Partner shall be reimbursed, at cost, by the Company for any and all expenses
incurred on behalf of the Company by the Tax Matters Partner while acting in its
capacity as Tax Matters Partner. Each Member shall furnish to the Committee all
pertinent information in its possession relating to Company operations that is
necessary to enable the Company's income tax returns to be prepared and filed.
Neither the Company, the Committee nor any Member may make an election for the
Company to be excluded from the application of the provisions of subchapter K of
chapter 1 of subtitle A of the Code or any similar provisions of applicable
state law, and no provision of this LLC Agreement shall be construed to sanction
or approve such an election.
Section 6.5 Tax Matters Partner. GEOSP shall be the "Tax Matters
-------------------
Partner" of the Company within the meaning of Section 6231(a)(7) of the Code and
shall act in any similar capacity under applicable state, local or foreign law
(in such capacity, the "Tax Matters Partner"). The Tax Matters Partner shall
take such action as may be reasonably necessary to constitute each of the other
Members a "notice partner" within the meaning of Section 6231(a)(8) of the Code.
The Tax Matters Partner shall notify the other Members of all material matters
that come to its attention in its capacity as Tax Matters Partner. The Tax
Matters Partner will give the other Members not less than 15 days' prior notice
as to any action to be taken or of any decision not to take action with respect
to any such material matter. In acting in its capacity as Tax Matters Partner,
GEOSP shall at all times act reasonably and in good faith, taking into account
the interests of all Members.
Section 6.6 Distributions. Except to the extent prohibited by
-------------
applicable law and provided that the Company has positive cash flow from
operations (after repayment of amounts due under loans made to the Company by a
Member or an Affiliate of a Member, including, without limitation, as provided
for in the Promissory Note) and the ability to continue its business without
incurring additional debt, the Members, through the Committee, shall cause the
Company to distribute available cash to each Member, on or prior to March 31 of
each year, pro rata in proportion to its Membership Interest.
Section 6.7 Withdrawals. No Member shall be entitled to make
-----------
withdrawals from its Capital Account.
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<PAGE>
ARTICLE VII
MANAGEMENT; CONDUCT OF BUSINESS
Section 7.1 Management by Committee.
-----------------------
(a) The powers of the Company shall be exercised by or under the
authority of, and the business and affairs of the Company shall be managed under
the direction of, the Members. In managing the business and affairs of the
Company and exercising its power, the Members shall act through their
representatives on the Committee as described in Section 7.2. Any Member who
binds or obligates the Company for any debt or liability or causes the Company
to act, except in accordance with the immediately preceding sentence, shall be
liable to the Company for any such debt, liability or act. Decisions or actions
taken by Members in accordance with this LLC Agreement (whether through the
Committee or otherwise) shall constitute decisions or actions by the Company and
shall be binding on each Member (in its capacity as such).
(b) Except as hereinafter provided, all decisions and actions of
the Company shall require the approval of a majority of the Committee members
meeting in accordance with Article VIII. Notwithstanding the foregoing
provisions of this Article VII, the following actions (collectively,
"Supermajority Transactions") shall require the consent of five (5) Committee
members:
(i) any merger/acquisition or sale or purchase of any material
assets which are greater than 20% of the fair value of the
total assets of the Company;
(ii) any transaction with a Member or its Affiliates, except as
expressly provided for in this LLC Agreement or in the
Ancillary Agreements;
(iii) changes, modifications and/or amendments to the Strategic Plan;
(iv) approval of the Company's annual Operating Plan only if the
aggregate expenditures for such Operating Plan differs by a
material amount (e.g., greater than or equal to 20%) from the
Strategic Plan;
(v) any amendment to the Company's Certificate of Formation, this
LLC Agreement, or any of the Ancillary Agreements;
(vi) the entering into of any contract valued at more than $10
million; and
(vii) the issuance or repurchase of Membership Interests or admission
of additional Members in accordance with Section 4.2.
Section 7.2 Establishment of the Committee.
------------------------------
(a) GEOSP and PP hereby establish the Committee. The Committee
shall consist of seven members, three appointed by each of GEOSP and PP and a
seventh member, who shall be the
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<PAGE>
Company's President and who shall be selected in accordance with Section 7.3(a)
and treated for all purposes of this LLC Agreement as being appointed to the
Committee by GEOSP. At any time the Company does not have a President, GEOSP may
designate the seventh member, who shall serve until a President is appointed in
accordance with Section 7.3 of this LLC Agreement. The Chairman of the Committee
shall be designated by GEOSP from among the members of the Committee appointed
by GEOSP, and the Vice-Chairman of the Committee shall be designated by PP from
among the members of the Committee appointed by PP. The members of the Committee
shall serve at the pleasure and on behalf of the party that appointed such
member, until such member resigns or is removed by the party that appointed such
member. All such members shall be officers, directors or employees of a Member
or the Company. A member of the Committee may be removed, with or without cause,
only by the party that appointed such member.
(b) The Members shall act through their representatives on the
Committee in the manner set forth below. Except as described in Section 7.1(b),
decisions by the Committee will require majority approval of a quorum of the
Committee members.
(c) Each Member shall designate its representatives on the
Committee to the other Members in writing, and such designation shall remain in
effect until the revocation of such designation has been made in writing. Such
writing will be signed by the chief executive officer of PP in the case of PP
and by the president of GEOSP in the case of GEOSP.
Section 7.3 Officers.
--------
(a) The Company shall hire as its President such individual as may
be designated from time to time by GEOSP for the compensation and on the other
terms and conditions designated by GEOSP. The President shall be vested by the
Committee with all necessary powers to conduct the normal business of the
Company. The President will be removed at the request of GEOSP with or without
cause at any time. Except as otherwise agreed to by GEOSP and PP, other primary
management functions of the Company shall be assigned by the President.
(b) The Committee may appoint such other officers as it may
determine from time to time. Except as otherwise agreed, each officer of the
Company shall hold office at the pleasure of the Committee, and the Committee
may remove any officer at any time, with or without cause. If appointed by the
Committee, the officers shall have the duties assigned to them by the Committee.
Section 7.4 Conduct of Business. Except as otherwise specifically
-------------------
provided in this LLC Agreement, the Committee shall have the authority to, and
shall, conduct the affairs of the Company on behalf of, and as representatives
of, the Members. The Committee shall conduct the Company's business and affairs
pursuant to, and in accordance with, the Strategic Plan and annual Operating
Plan in Exhibit 3 attached hereto and any other goals established by the
Committee. The Committee shall review the Strategic Plan and Operating Plan not
less frequently than annually and shall establish goals consistent therewith for
the next Fiscal Year, not later than three months prior to the commencement of
each Fiscal Year, in accordance with the requirements of Section 7.1(b)(iv). The
Committee may delegate to such officers as it may appoint from time to time the
authority to conduct the day-to-day operations of the Company's business. The
Company hereby adopts, and the Committee shall cause the Company to be operated
in accordance with, the GE Company Policies, attached hereto as Exhibit 4, and
policies consistent with applicable laws,
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<PAGE>
including but not limited to U.S. export control laws. In carrying out their
responsibilities, the Committee members and officers of the Company shall be
indemnified by the Company to the fullest extent allowed by Delaware law.
Section 7.5 Conflicts of Interest. Subject to the other express
---------------------
provisions of this LLC Agreement, particularly Section 9.3, each Member and its
respective Committee members and Affiliates may engage in and possess interests
in other business ventures of any and every type and description, independently
or with others, including ones in competition with the Company, with no
obligation to offer to the Company or any other Member the right to participate
in such other business ventures. Subject to Section 7.1(b)(ii) of this LLC
Agreement and the provisions of any Ancillary Agreement, the Company may
transact business with any Member, their Affiliates and their respective
directors, officers, employees and agents, provided the terms of those
transactions are substantially comparable to those the Company could obtain from
unrelated third parties.
Section 7.6 Employment and Secondment Matters. The Members agree as
---------------------------------
to certain employment and employee secondment matters as set forth on Annex C.
ARTICLE VIII
MEETINGS OF THE COMMITTEE
Section 8.1 Regular and Special Meetings. Regular meetings of the
----------------------------
Committee shall be held at such times and places, within or without the State of
Delaware, as the Committee may from time to time determine. Special meetings of
the Committee may be called by any four Committee Members, and shall be held at
such times and places, within or without the State of Delaware, as may be
specified in such call.
Section 8.2 Notices of Meetings. Notice of the time and place of
-------------------
each meeting of the Committee shall be given to each Committee member by the
person or persons calling such meeting. Such notice need not specify the
purpose or purposes of the meeting (unless a Supermajority Transaction is
proposed for consideration) and may be given in any manner or method and at such
time so that the Committee member receiving it may have reasonable opportunity
to participate in the meeting. The giving of notice shall be deemed to have
been waived by any Committee member who shall participate in such meeting and
may be waived, in writing, by any Committee member either before or after such
meeting.
Section 8.3 Quorum. Six Committee members shall constitute a quorum
------
for the transaction of business by the Committee. Whenever less than a quorum
is present at the time and place appointed for any meeting of the Committee, a
majority of those present may adjourn the meeting from time to time, until a
quorum shall be present.
Section 8.4 Action by Written Consent or Telephone Conference. Any
-------------------------------------------------
action permitted or required by the Act or this LLC Agreement to be taken at a
meeting of the Committee may be taken without a meeting if a consent in writing,
setting forth the action to be taken, is signed by all the members of the
Committee. Such consent shall have the same force and effect as a unanimous
vote at a meeting and may be stated as such in any document or instrument filed
with the Secretary of State of Delaware, and the
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<PAGE>
execution of such consent shall constitute attendance or presence in person at a
meeting of the Committee. Subject to the requirements of the Act or this LLC
Agreement, members of the Committee may participate in and hold a meeting of the
Committee by means of a conference telephone or similar communications equipment
by means of which all participants can hear each other, and participation in
such meeting shall constitute attendance and presence in person at such meeting,
except where a person participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
Section 8.5 Substitute Committee Members. If a Committee member is
----------------------------
unavailable for any particular Committee meeting, the Member that appointed such
Committee member shall have the right to appoint a substitute Committee member
for such meeting.
ARTICLE IX
ADDITIONAL COVENANTS
Section 9.1 Public Announcements, Etc. The Members shall consult
-------------------------
with each other before issuing any press release or making any public statement
with respect to this LLC Agreement or the organization of the Company and,
except as may be required by Applicable Law or any national or international
securities exchange, will not issue any such press release or make any such
public statement without the consent of both Members. Notwithstanding the
foregoing, no provision of this LLC Agreement shall relieve a Member from any of
its obligations under Section 9.2.
Section 9.2 Confidentiality. The Members agree to follow, and to
---------------
cause the Company to follow, the following requirements regarding
confidentiality:
(a) Each Member and the Company (each, for purposes of this
Section 9.2, a "Party") expects to furnish to one or more of the other Parties
certain confidential information which will constitute trade secrets or other
proprietary business or technical information belonging to the disclosing Party
(including, but not limited to, components, processes, financial information,
drawings, specifications and other data, whether in written, printed, oral or
other form) and will be marked "Confidential" or "Proprietary" (such information
is hereinafter referred to as "Confidential Information") at the time it is
disclosed. Oral information which is confidential or proprietary shall be
reduced to writing by the disclosing Party within ten (10) working days after
disclosure, which writing shall specifically reference the date of disclosure
and otherwise conform to the requirements of this paragraph. Any information
which is disclosed in any other manner shall be deemed to be non-confidential.
The receiving Party shall not disclose Confidential Information to anyone except
its employees who have a need to know such Confidential Information in order to
perform their work and shall inform such individuals of the confidential nature
of the Confidential Information. Subject to the provisions of subsection (b),
below, the receiving Party shall use the Confidential Information only for the
purpose of such work and shall use efforts to protect the confidentiality of
such Confidential Information commensurate with those which it employs for the
protection of its own confidential information, but it shall not be liable for
unauthorized revelations of such Confidential Information which occur in spite
of such efforts.
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<PAGE>
(b) Notwithstanding the provisions of subsection (a) above, (i)
the receiving Party shall not be subject to any restriction hereunder with
respect to any part of such Confidential Information which appears in issued
patents or publications, which is known or becomes generally known to the
relevant public through no fault of the receiving Party, which is independently
generated by the receiving Party without use of the Confidential Information,
which is furnished to others by the disclosing Party without restriction on
disclosure, which was or becomes known to the receiving Party through other
sources free of any confidentiality restriction, which must be disclosed by
requirements of law or valid legal or regulatory process, in which case the
Party intending to make such disclosure shall notify the Party which designated
the material as confidential in advance of any such disclosure and reasonably
cooperate with any attempt to maintain the confidentiality of such materials;
and (ii) any and all restrictions with respect to Confidential Information
provided hereunder will expire three (3) years after the date that such
Confidential Information is disclosed to the receiving Party.
(c) When one Party no longer desires to use the Confidential
Information of another Party, it shall return to the other Party any such
Confidential Information and shall destroy all copies of such Confidential
Information with the exception of one copy which may be retained exclusively for
the purpose of documenting the disclosures made hereunder.
(d) The Company will restrict access to any Confidential
Information made available or disclosed by a Member to the Company hereunder
only to those employees of the Company with a need to know such information in
performance of their jobs with the Company.
Section 9.3 Protection of Business. In consideration of the
----------------------
respective benefits of this LLC Agreement to the Members, and subject to the
terms and conditions of the Distributor Agreement, a form of which is attached
hereto as Exhibit 9, the Members hereby covenant and agree that during the term
of this LLC Agreement
(a) PP and its Affiliates will not compete with the Company,
directly or indirectly, in the Territory, for the sale of Products, Pre-
Commercial Units, and Test & Evaluation Units, and the provision of Services, so
long as, and to the extent that, the Company is PP's exclusive distributor in
the Territory under the Distributor Agreement (except for sales of Test &
Evaluation Units and Pre-Commercial Units to federal, state, municipal and other
governmental entities, the Gas Research Institute, Electric Power Research
Institute, and such other industry groups mutually agreed to by SUPPLIER and
DISTRIBUTOR, to the extent such entities and groups are purchasing the units for
their research and development, as opposed to purchasing the units for resale);
(b) GEOSP shall not sell PEM Fuel-Cell Powered Generator Sets,
replacement parts, upgrades, accessories, and improvements that compete with the
Products and Pre-Commercial Units in the Territory, directly or through any
Person other than the Company, provided that the Products are competitive, as
determined pursuant to this subsection (b), with non-PP manufactured PEM Fuel
Cell-Powered Generator Sets. If GEOSP determines, in good faith, that the
Products are not competitive, then PP will be allowed a period of 12 months to
make the Products competitive, after which, if the products are still not
competitive, GEOSP shall not be bound by the non-compete provisions of this
subsection (b) and/or GEOSP may terminate this LLC Agreement. If GEOSP decides,
in accordance with this subsection (b), to sell PEM Fuel-Cell Powered Generator
Sets, replacement parts, upgrades, accessories, and improvements that compete
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<PAGE>
with the Products and Pre-Commercial Units in the Territory directly or through
any other Person, then either Member may terminate this LLC Agreement. GEOSP
will consider the following factors, in good faith and as a whole, in
determining whether the Products are competitive: (i) the wholesale price of
Products is no more than 5% greater than such price for non-PP manufactured PEM
Fuel Cell-Powered Generator Sets; (ii) the lifetime end user cost per kWh
generated by the Products is no more than 5% greater than that for non-PP
manufactured PEM Fuel Cell-Powered Generator Sets, where end user cost per kWh
will be calculated as the wholesale price plus installation, lifetime operations
and maintenance cost, divided by the kWh consumption over the operating life;
(iii) the Product's emissions (NOx and CO measured in parts per million), noise
(in Db), and size (in cubic feet) are no more than 10% greater than that for
non-PP manufactured PEM Fuel Cell-Powered Generator Sets; and (iv) the Product's
reliability is no more than 5% worse than that for non-PP manufactured PEM Fuel
Cell-Powered Generator Sets.
Notwithstanding the preceding paragraph of subsection (b), for any particular
year beginning in "2001" (as defined in Schedule D of the Distributor
Agreement), if the Company achieves at least 50% of its Major Market Sales
Commitment (as defined in Schedule D of the Distributor Agreement) in any Major
Market in any year, then the Products will be deemed to be competitive in such
Major Market for such year. Notwithstanding the failure of the Company to
achieve at least 50% of its Major Market Sales Commitment in any Major Market
for such year, if the Company achieves at least 66% of its Global Sales
Commitment (as defined in Schedule D of the Distributor Agreement) for such
year, then the Products will be deemed to be competitive for the entire
Territory for such year. In any part of the Territory outside of the Major
Markets, the Products shall be deemed competitive for such part of the Territory
for such year if the Company achieves at least 50% of its Global Sales
Commitment for such year.
Section 9.4 Promotion of the Company. GEOSP and PP will use all
------------------------
reasonable efforts to (a) promote the use of the Products, Pre-Commercial Units,
and Services in the Territory, (b) support the Company in obtaining government
authorizations as may be necessary or appropriate to operate the Company, and
(c) make available support in conducting the day to day operations of the
Company, including but not limited to administration, sales support, warehousing
administration, and financial planning and budgeting; provided, that all such
--------
efforts shall be in accordance with this LLC Agreement and the Ancillary
Agreements. This Section will not be construed to expand either party's
obligations in respect of matters specifically addressed elsewhere in this LLC
Agreement or in any Ancillary Agreement.
Section 9.5 Ethical and Environmental Standards. Each Member shall
-----------------------------------
ensure that all actions on its behalf in connection with the Company are in
compliance with the highest ethical standards. In particular, each party shall
ensure that no money or anything of value (such as a bribe or kickback) is
offered, given or authorized to be given, directly or indirectly, to a customer
or government official to influence or reward action or inaction with regard to
the Company. GEOSP shall have the right to cause an environmental baseline
study to be prepared, at the Company's cost, for any facilities to be used by
the Company.
Section 9.6 Tax Matters. The Members agree to cooperate to structure
-----------
the operation of the Company in a manner which enables each party and the
Company to optimize its tax position with respect to the joint venture. If
during the course of the operation of the Company, United States tax laws change
so as to have a significant impact on either of the Members or the Company, the
Members agree
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to cooperate to make such mutually acceptable changes to this LLC Agreement
insofar as allowed under law as will enable the affected party to optimize its
tax position resulting from the change in the law.
Section 9.7 Other Covenants.
---------------
(a) PP will train sufficient personnel in the Company, PP, GEOSP
and GEOSP's Affiliates as may be needed in the conduct of the Company's
operations, at terms and prices mutually agreed to between PP and the Company.
(b) The Company will use its best efforts to hire marketing,
sales, and service personnel and/or contract with third parties to market and
sell Products and Pre-Commercial Units in the manner that its Affiliates market
and sell similar products, and to provide Services to ensure a level of customer
service consistent with that provided for other GE-branded products, taking into
consideration the sales volumes of Products and Pre-Commercial Units.
(c) Each Member's patents, trademarks, trade names, inventions,
copyrights, know-how, trade secrets, licensed rights or other intellectual
property rights ("Intellectual Property") now in existence or hereafter lawfully
-
acquired or developed by such Member shall not be deemed to be transferred to
any other Member or to the Company by virtue of this LLC Agreement.
Notwithstanding the foregoing provisions of this Section 9.7(c), GEOSP hereby
grants to PP a perpetual non-exclusive, non-transferable, irrevocable, royalty-
free, fully paid up license to use Product information regarding market size,
demographics, demand, segmentation, design parameters sought by the market, and
contact information (names, addresses, telephone numbers) for customers,
resellers, service providers, code bodies, and similar information acquired or
developed by the Company under this LLC Agreement.
Section 9.8 Further Assurances. Subject to the terms and conditions
------------------
of this LLC Agreement, each Member will use all reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary or desirable under Applicable Law and otherwise to consummate the
transactions contemplated by this LLC Agreement and to refrain from taking any
action that would prevent or delay the consummation of the transactions
contemplated by this LLC Agreement. The Members will execute and deliver such
other documents, certificates, agreements and other writings and take such other
actions as may be reasonable and necessary or desirable in order to consummate
or implement expeditiously the transactions contemplated by this LLC Agreement.
Section 9.9 Ancillary Agreements. Contemporaneously with or prior to
--------------------
the execution of this LLC Agreement, the Members, as applicable, shall enter
into or have entered into, or shall cause or have caused their Affiliates, as
applicable, to enter into, the Ancillary Agreements. The termination of an
Ancillary Agreement, without substitution with an agreement acceptable to the
Members, shall result in termination of this LLC Agreement pursuant to Section
10.2.
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ARTICLE X
DISPUTES; TERMINATION OF THIS LLC AGREEMENT
Section 10.1 Resolution of Disputes. If there shall exist a dispute
----------------------
between the Members relating to approval of any Supermajority Transaction which
substantially impairs the Company's ability to operate and flourish in a manner
consistent with that anticipated by this LLC Agreement or substantially
constrains the Company's prospects, the Members shall negotiate in good faith
for a period of thirty (30) days in an effort to resolve the dispute. If such
negotiations are not successful, either party shall have the right and option to
notify the other party that the provisions of this Section 10.1 shall be invoked
(the "Dispute Notice"). If a Dispute Notice is given and if requested by either
party within 10 days thereafter, the Members shall submit the matter in dispute
to the chief executive officer of GEOSP and the chief executive officer of PP
for their review and resolution in such manner as they deem necessary or
appropriate. The Committee will be bound by any resolution reached by the
officers to whom such matter is submitted. If such officers cannot resolve such
matter within 30 days after submission to them, then this LLC Agreement shall
terminate.
Section 10.2 Termination.
-----------
(a) This LLC Agreement may be terminated by either GEOSP or PP by
giving 30 days' notice if (i) the other party is in Material Breach, or (ii) the
Distributor Agreement or any other Ancillary Agreement is terminated and not
replaced.
(b) This LLC Agreement shall automatically be terminated upon:
(i) the written consent of all Members; or
(ii) the sale, exchange or other disposition of all or
substantially all of the assets of the Company.
(c) This LLC Agreement may be terminated in accordance with the
provisions of Sections 5.5(a), 9.3(b), and 10.1 of this LLC Agreement.
Section 10.3 Effect of Termination. If this LLC Agreement is
---------------------
terminated, the Members shall have no further obligations hereunder, except that
the provisions of Sections 9.1 and 9.2 shall survive the termination of this LLC
Agreement. The Members will have additional obligations upon the termination of
the Distributor Agreement, as set forth therein.
Section 10.4 Survival of Representations and Warranties.
------------------------------------------
Notwithstanding any investigation made by GEOSP, PP or the Company, or such
Member's or the Company's representative, with respect to the representations or
warranties of the other party, the representations and warranties of the Members
contained in this LLC Agreement or in any certificate or other writing delivered
pursuant hereto or in connection herewith shall survive until the third
anniversary of the execution hereof or (i) in the case of paragraphs 1, 2, 4 and
7 of Annex B, indefinitely, and (ii) in the case of paragraphs 5, 8 and 9 of
Annex B, until expiration of the applicable statutory period of limitations
(giving effect to any waiver, mitigation or extension thereof), if later.
Notwithstanding the preceding sentence, any representation or warranty in
respect of which indemnity may be sought under Section 10.5 shall survive the
time at which it
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would otherwise terminate pursuant to the preceding sentence, if notice of the
inaccuracy or breach thereof giving rise to such right to indemnity shall have
been given to the party against whom such indemnity may be sought prior to such
time. All covenants and agreements contained in this LLC Agreement shall survive
until fully performed in accordance with their terms.
Section 10.5 Indemnifiable Claims. Subject to the limitations set
--------------------
forth in any Ancillary Agreement, the Members agree to the following
indemnifications and procedures:
(a) Indemnification by the Members. Each Member hereby agrees to
------------------------------
indemnify the other Members and the Company (without duplication) and their
respective Affiliates, directors, officers and employees against, and agree to
hold them harmless from, any and all Damages incurred or suffered by any of them
as a result of claims by third parties arising out of or related in any way to
(i) any misrepresentation or breach of any representation or warranty made by
the Members in this LLC Agreement, and (ii) the breach or non-performance of any
covenant or obligation required by this LLC Agreement to be performed or
observed the Member, provided, however, that no Member shall be required to pay
-------- -------
any Damages arising under clause (i) of this Section 10.5(a) unless and until
the aggregate amount of such Damages attributable to such Member shall reach
$25,000, at which time such Member shall become responsible for all such Damages
(including the initial $25,000); and provided further, that the indemnification
-------- -------
obligations of the Members hereunder shall each be limited to $1,000,000. The
foregoing indemnification shall not in any manner limit a Member's legal
remedies against the other Member under applicable law.
(b) Waiver of CERCLA Defense. The Members, on behalf of
------------------------
themselves and their respective Affiliates, and the Company expressly waive any
claim or defense that the indemnifications contained in this LLC Agreement or in
the Ancillary Documents are unenforceable under Section 107(e) of CERCLA.
(c) Notice. Each party to this Agreement agrees to give prompt
------
notice to the other parties to this Agreement of the assertion of any claim, or
the commencement of any suit, action or proceeding brought by a Person that is
not a party to this Agreement ("Indemnified Claims") in respect of which the
Members, the Company or their respective Affiliates, or their respective
directors, officers, employees or agents seek indemnity under Section 10.5(a),
after such Member of the Company becomes aware of the facts giving rise to such
Indemnified Claim. The failure of any party to provide notice pursuant to this
Section 10.5(d) shall not constitute a waiver of that party's claims to
indemnification pursuant to Section 10.5 in the absence of material prejudice to
the party that did not receive such notice. Any such notice to a party shall be
accompanied by a copy of any papers theretofore served on the notifying party in
connection with the Indemnified Claims.
(e) Defense and Settlement of Claims.
--------------------------------
(i) Assumption of Defense. Upon receipt of notice from a
---------------------
party seeking and entitled to indemnification (an "Indemnified Party")
pursuant to this Agreement, the party or parties against whom
indemnification is sought (an "Indemnifying Party") will, subject to the
provisions of Section 10.5(e)(ii), assume the defense and control of such
Indemnified Claims but shall allow the Indemnified Party or Parties a
reasonable opportunity to participate in the defense thereof with its
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or their own counsel and at its or their own expense. The Indemnifying
Party shall (A) select counsel, contractors and consultants of recognized
standing and competence after consultation with the Indemnified Party or
Parties, (B) take all steps necessary in the defense or settlement thereof
and (C) at all times diligently and promptly pursue the resolution thereof.
The Indemnified Party or Parties shall, and shall cause each of their
respective Affiliates and their respective directors, members, officers,
employees, and agents to, cooperate fully with the Indemnifying Party in
the defense of any Indemnified Claim.
(ii) Settlement of Claims. The Indemnifying Party shall be
--------------------
authorized to consent to a settlement of, or the entry of any judgment
arising from, any Indemnified Claims, without the consent of any
Indemnified Party; provided, that the Indemnifying Party shall (A) pay or
--------
cause to be paid all amounts arising out of such settlement or judgment
concurrently with the effectiveness thereof, (B) not encumber any of the
assets of any Indemnified Party or agree to any restriction or condition
that would apply to such Indemnified Party or to the conduct of that
party's business, (C) obtain, as a condition of any settlement or other
solution, a complete release of each Indemnified Party and (D) provide to
the Indemnified Party notice of the proposed settlement prior to such
settlement.
ARTICLE XI
DISSOLUTION, LIQUIDATION AND TERMINATION OF THE COMPANY
Section 11.1 Dissolution. The Company shall be dissolved and its
-----------
affairs wound up on the first to occur of the following:
(a) the Members shall agree in writing to dissolve the Company;
(b) any Member shall become a Bankrupt Member or dissolve, or
there shall occur any other event (other than a transfer of a Membership
Interest in accordance with Article IV or Article X) that terminates the
continued membership in the Company of any Member;
(c) the entry of a decree of judicial dissolution of the Company
under (S) 18-802 of the Act; and
(d) the termination of this LLC Agreement.
Section 11.2 Liquidation and Termination. On dissolution of the
---------------------------
Company, the Committee shall appoint as liquidator one or more Persons that are
not affiliated with the Members. The liquidator shall proceed diligently to
wind up the affairs of the Company and make final distributions as provided in
this LLC Agreement and in the Act. The costs of liquidation shall be borne as a
Company expense. Until final distribution, the liquidator shall continue to
operate the Company properties with all of the power and authority of a Required
Interest. A reasonable time shall be allowed for the orderly liquidation of the
assets of the Company and the discharge of liabilities to creditors so as to
enable the liquidator to minimize any losses resulting from liquidation. The
liquidator, as promptly as possible after dissolution and again after final
liquidation, shall cause a proper accounting to be made by a recognized firm of
certified public accountants of
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the Company's assets, liabilities, and operations through the last day of the
calendar month in which the dissolution occurs or the final liquidation is
completed, as applicable, and shall apply the proceeds of liquidation as set
forth in the remaining sections of this Article XI.
Section 11.3 Payment of Debts. The assets shall first be applied to
----------------
the payment of the liabilities of the Company (other than any loans or advances
that may have been made by Members to the Company) and the expenses of
liquidation.
Section 11.4 Debts to Members. The remaining assets shall next be
----------------
applied to the repayment of any loans made by any Member or Member Affiliate to
the Company.
Section 11.5 Remaining Distribution. The remaining assets shall then
----------------------
be distributed to the Members in the following order:
(a) If non-cash property of the Company is to be distributed, the
fair market value of such property as of the date of dissolution shall be
determined by the Members pursuant to Part B.7(a) of Exhibit 2 using such
reasonable methods of valuation as they may adopt. Such property shall be deemed
to have been sold as of the date of dissolution for such fair market value, and
the Capital Accounts of the Members shall be adjusted prior to the distribution
of such property pursuant to Article VI of this LLC Agreement to reflect the
manner in which gain or loss which would have been realized by the Company as a
result of such deemed sale would have been allocated under Article VI and
Exhibit 2 of this LLC Agreement.
(b) Distributions shall be made according to the positive
balance(s) (if any) of the Members' Capital Accounts (as determined after taking
into account all Capital Account adjustments for the Company's Fiscal Year
during which the liquidation occurs), either in cash or in kind, as determined
by the Committee, with any assets distributed in kind being valued for this
purpose at their fair market value as determined pursuant to Section 11.5(a).
Any such distributions to the Members in respect of their Capital Accounts shall
be made in accordance with the time requirements set forth in Treas. Reg. (S)
1.704-1(b)(2)(ii)(b)(2).
(c) Notwithstanding anything to the contrary in this LLC
Agreement, upon a liquidation within the meaning of Treas. Reg. (S) 1.704-
1(b)(2)(ii)(g), if any Member has a deficit Capital Account (after giving effect
to all contributions, distributions, allocations, and other Capital Account
adjustments for all Fiscal Years, including the year during which such
liquidation occurs), the Member shall have no obligation to make any Capital
Contribution, and the negative balance of such Capital Account shall not be
considered a debt owed by the Member to the Company or to any other Person for
any purpose whatsoever.
Section 11.6 Reserve. Notwithstanding the provisions of Sections 11.4
-------
and 11.5, the liquidator may retain such amount as it deems necessary as a
reserve for any contingent liabilities or obligations of the Company, which
reserve, after the passage of a reasonable period of time, shall be distributed
pursuant to the provisions of this Article XI.
Section 11.7 Final Accounting. Each of the Members shall be
----------------
furnished with a statement prepared by the Company's certified public
accountants, which shall set forth the assets and liabilities of the
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Company as of the date of the complete liquidation. Upon the compliance by the
liquidator with the foregoing distribution plan, the liquidator shall execute
and cause to be filed a certificate of cancellation and any and all other
documents necessary with respect to termination and cancellation of the Company
under the Act.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Relationship of the Members. The relationship of the
---------------------------
Members shall be limited solely to the purpose and scope of the Company as
expressed in this LLC Agreement and in the Ancillary Agreements. This LLC
Agreement shall not constitute the appointment of either party to this LLC
Agreement as the legal representative or agent of the other party. Neither
party to this LLC Agreement shall have any right or authority to assume, create
or incur any liability or any obligation of any kind, express or implied,
against or in the name of or on behalf of the other party to this LLC Agreement.
Except as may be specifically provided in this LLC Agreement or any Ancillary
Agreement, neither the Company nor either party shall assume or be responsible
for any liability or obligation of any nature of, or any liability or obligation
that arises from any act or omission to act of, any other party however or
whenever arising.
Section 12.2 Performance by the Company. The Members shall cause the
--------------------------
Company to perform the obligations on the Company's part to be performed by it
under this LLC Agreement and the Ancillary Agreements.
Section 12.3 Agreement for Further Execution. At any time or times
-------------------------------
upon the request of the Committee or either Member, each Member agrees to sign
and swear to any certificate, any amendment to or cancellation of such
certificate, acknowledge similar certificates or affidavits or certificates of
fictitious firm name or the like (and any amendments or cancellations thereof)
required by the laws of the State of Delaware, or any other jurisdiction in
which the Company does, or proposes to do, business. This Section 12.3 shall
not prejudice or affect the rights of the Members to approve certain amendments
to this LLC Agreement pursuant to Section 12.5.
Section 12.4 Notices. All notices, requests and other communications
-------
to any party or to the Company hereunder shall be in writing (including telex,
telecopy or similar writing) and shall be given,
if to GEOSP: GE On-Site Power, Inc.
One River Road
Schenectady, NY 12345
Attention: President
Telecopy: (518) 385-5704
with a copy to: GE Power Systems
One River Road
Schenectady, NY 12345
Attention: General Counsel
Telecopy: (518) 385-4725
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<PAGE>
if to PP: Plug Power, L.L.C.
968 Albany-Shaker Road
Latham, NY 12110
Attention: President and CEO
Telecopy: (518) 782-7914
or to such other address or telecopy number and with such other copies, as such
party may hereafter specify by notice to the other parties. Each such notice,
request or other communication shall be effective upon receipt, provided that if
the day of receipt is not a Business Day then it shall be deemed to have been
received on the next succeeding Business Day.
Section 12.5 Amendments; No Waivers.
----------------------
(a) Any provision of this LLC Agreement may be amended or waived
if, and only if, such amendment or waiver is in writing and signed, in the case
of an amendment, by all the Members, or in the case of a waiver, by the party
against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right,
power or privilege under this LLC Agreement shall operate as a waiver thereof
nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies in this LLC Agreement provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
Section 12.6 Successors and Assigns. Neither party shall assign this
----------------------
LLC Agreement or any of its rights in and to this LLC Agreement, except that
GEOSP may, upon notice to PP, assign its rights in this LLC Agreement to an
Affiliate of GE. Subject to the preceding sentence and other provisions hereof,
the provisions of this LLC Agreement shall be binding upon and inure to the
benefit of the Members and their respective permitted successors and assigns.
Section 12.7 Governing Law. The laws of the State of Delaware shall
-------------
govern the validity, interpretation, construction, performance, and enforcement
of this LLC Agreement, provided that any provision of such laws (e.g., choice of
law provisions) invalidating any provision of this LLC Agreement or modifying
the intent of the Members as expressed in the terms of this LLC Agreement shall
not apply. It is further agreed that any and all litigation relating to this
LLC Agreement or the Company shall be brought in a state or federal court
located within the State of New York; and each Member, for the purpose of all
such litigation, hereby submits to the exclusive jurisdiction and venue of such
courts.
Section 12.8 Illegality and Severability. If application of any one
---------------------------
or more of the provisions of this LLC Agreement shall be unlawful under
applicable law and regulations, then the parties will attempt in good faith to
make such alternative arrangements as may be legally permissible and which carry
out as nearly as practicable the terms of this LLC Agreement. Should any
portion of this LLC Agreement be deemed unenforceable by a court of competent
jurisdiction, the remaining portion hereof shall remain unaffected and be
interpreted as if such unenforceable portions were initially deleted.
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Section 12.9 Counterparts; Effectiveness. This LLC Agreement may be
---------------------------
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and to this LLC Agreement were upon
the same instrument. This LLC Agreement shall become effective when each party
to this LLC Agreement shall have received a counterpart hereof signed by the
other party to this LLC Agreement.
Section 12.10 Entire Agreement. This LLC Agreement and the Ancillary
----------------
Agreements (and any other agreements contemplated hereby or thereby) constitute
the entire agreement among the Members with respect to the subject matter hereof
and supersede all prior agreements, understandings and negotiations, both
written and oral, between the Members with respect to the subject matter hereof
or thereof (including, without limitation, the Memorandum of Understanding of
the Members dated July 2, 1998). No representation, inducement, promise,
understanding, condition or warranty not set forth in this LLC Agreement has
been made or relied upon by any party to this LLC Agreement. This LLC Agreement
is not intended to confer upon any Person other than the Members and the Company
any rights or remedies hereunder.
Section 12.11 Captions. The captions in this LLC Agreement are
--------
included for convenience or reference only and shall be ignored in the
construction or interpretation hereof.
Section 12.12 Expenses. All costs and expenses incurred in
--------
connection with the transactions contemplated by this LLC Agreement shall be
paid by the Member incurring such cost or expense, except as otherwise provided
in this LLC Agreement or any Ancillary Agreement.
Section 12.13 Limitation of Liability. In no case will a Member be
-----------------------
liable to the other for special, incidental, or consequential damages,
including, but not limited to, personal injury, property damage, loss of profit
or revenues, or business interruption.
IN WITNESS WHEREOF, the Members have hereunto set their hands on the
day and year first above written.
MEMBERS:
-------
GE ON-SITE POWER, INC.
By: /s/ Ricardo Artigas
-----------------------------------------
Ricardo Artigas, President
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PLUG POWER, L.L.C.
By: /s/ Gary Mittleman
-----------------------------------------
Gary Mittleman, President and CEO
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Annex A
-------
DEFINITIONS
-----------
(a) Definitions. The following terms, as used in this LLC Agreement or
-----------
any Ancillary Agreement, unless otherwise specifically defined therein, have the
following meanings:
"Act" means the Delaware Limited Liability Company Act, Del. Stat.
(S)(S) 18-101 to 18-1107, inclusive, as in effect from time to time in the State
of Delaware.
"Additional Member" means any Person admitted as a Member of the
Company after the date of original execution of this LLC Agreement in accordance
with the provisions of Section 4.2 hereof.
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such other
Person, except that an Affiliate of PP shall only include any Person directly or
indirectly controlled by PP. As used herein, control shall mean the ownership,
either directly or by attribution, of more than 50% of the combined voting
rights attributable to the equity interests of a Person or the ability, either
direct or indirect, to control the composition of the majority of the Board of
Directors or comparable management body of a person.
"Ancillary Agreements" means the Contribution Agreement, Promissory
Note and Security Agreement, GE Trademark and Tradename Agreement, PP Trademark
Agreement, and Distributor Agreement contemplated by and executed in connection
with this LLC Agreement, forms of which are attached to this LLC Agreement as
Exhibits 5 through 9, respectively.
"Applicable Law" means, with respect to any Person, any domestic or
foreign, federal, state or local statute, law, ordinance, rule, administrative
action, regulation, order, writ, injunction, judgment, decree or other
requirement of any Governmental Authority (including any Environmental Law)
applicable to such Person or any of its Affiliates or any of their respective
properties, assets, officers, directors, employees, consultants or agents (in
connection with such officer's, director's, employee's, consultant's or agent's
activities on behalf of such Person or any of its Affiliates).
"Bankrupt Member" means any Member (i) that (A) makes an assignment
for the benefit of creditors; (B) files a voluntary petition in bankruptcy; (C)
is adjudged bankrupt or insolvent, or has entered against such Member an order
for relief, in any bankruptcy or insolvency proceedings; (D) files a petition or
answer seeking for the Member any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law
or regulation; (E) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against the Member in any
proceeding of the type described in subclauses (A) through (D) of this clause
(i); or (F) seeks, consents to, or acquiesces in the appointment of a trustee,
receiver or liquidator of the Member or of all or any substantial part of the
Member's properties; or (ii) against which, a proceeding seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief under any statute, law or regulation has been commenced and one hundred
twenty (120) days have expired without dismissal thereof or with respect to
which, without the Member's consent or acquiescence, a trustee, receiver or
liquidator of the Member or of all or any substantial part of the Member's
properties has been appointed and ninety (90) days have expired
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<PAGE>
without the appointment having been vacated or stayed, or ninety (90) days have
expired after the date of expiration of a stay, if the appointment has not
previously been vacated.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended,
11 U.S.C. (S)(S) 101 et seq.
-- ---
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in New York, New York are authorized or required by
law to close.
"Capital Account" means, as to a Member, the account established and
maintained for such Member pursuant to Article VI hereof.
"Capital Contribution" means the amount in cash or the value of
property contributed by each Member (or its original predecessor in interest) to
the capital of the Company in exchange for such Member's interest in the
Company.
"Code" means the Internal Revenue Code of 1986, as amended, together
with the rules and regulations promulgated thereunder.
"Committee" means the committee established pursuant to Section 7.2
hereof.
"Company" means "GE Fuel Cell Systems, L.L.C.," a Delaware limited
liability company.
"Contemplated Transactions" means the transactions contemplated by
this LLC Agreement and the Ancillary Agreements.
"Damages" means all assessments, losses, damages, costs, expenses,
liabilities, judgments, awards, fines, sanctions, penalties, charges and amounts
paid in settlement, including, without limitation, reasonable costs, fees and
expenses of attorneys, experts, accountants, appraisers, consultants, witnesses,
investigators and any other agents or representatives (with such amounts to be
determined net of any resulting tax benefit and net of any refund or
reimbursement of any portion of such amounts including, without limitation,
reimbursement by way of third party insurance or third party indemnification)
arising from or incurred in connection with any demand, claim, action, cause of
action or proceeding.
"Dispose," "Disposing," or "Disposition" means a sale, assignment,
transfer, exchange, mortgage, pledge, grant of a security interest, or other
disposition or encumbrance (including, without limitation, by operation of law).
"Fair Market Value" means, with respect to a Membership Interest in
the Company, the cash price that an unrelated party would pay for such
Membership Interest, in light of all relevant factors in an arm's length
transaction in which neither party is compelled to buy or sell. The Fair Market
Value of Membership Interest in the Company shall be determined pursuant to the
procedure set forth in the balance of this paragraph. Each party shall submit
simultaneously to the other party a sealed proposal for the Fair Market Value
within 30 days after the event which triggers the valuation. Following the
delivery of the two proposals,
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<PAGE>
the amounts of the two proposals shall be compared. If the lower of the
proposals is equal to or more than 90% of the higher of the proposals, the Fair
Market Value shall be deemed to be the average of the two proposals. If the
lower of the proposals is more than 10% less than the higher of the two
proposals, the parties shall negotiate in good faith to determine the Fair
Market Value. If the parties cannot agree on the Fair Market Value within 30
days of the opening of the sealed proposals, the parties shall each appoint,
within ten days after the end of such period, an investment banking firm or
other firm with significant experience in the valuation of businesses, in either
case, of recognized standing, which firms need not be independent of the
Company, PP and GE. Such firms shall negotiate in good faith to determine the
Fair Market Value. If the firms cannot agree on the Fair Market Value within 30
days after the latter of them to be appointed, the two firms shall, within 10
days after the end of such 30-day period, (i) appoint a third such firm with
significant experience in the valuation of businesses, of recognized standing,
and independent of the Company, PP and GE, and (ii) share the results of their
valuation analysis with such third firm. The third firm shall determine the Fair
Market Value within 45 days after being appointed. The determination of Fair
Market Value by this third firm shall be final and conclusive. The parties shall
share equally the costs of compensating all of the foregoing firms.
"Fiscal Year" has the meaning set forth in Section 6.2(b) of this LLC
Agreement.
"GAAP" means generally accepted accounting principles.
"GE Company Policies" means the corporate policy statements relating
to compliance with law, GE's General Accounting Practices and other matters
adopted and published by GE, which are attached to this LLC Agreement as Exhibit
4, as amended and supplemented from time to time, or any successor policies
adopted by GE.
"GEOSP Disclosure Schedule" means the Disclosure Schedule provided by
GEOSP to PP on the date of signing of this LLC Agreement.
"GEPS Competitor" means any of the following Persons, provided that
GEOSP may revise this list upon written notice to PP to include additional
Persons involved directly, or indirectly through an Affiliate, in the
manufacture, assembly, or provision of O & M services for, gas or steam
turbines, regardless of origin or design: AAR Engine Group - USA; ABB -
Switzerland; Advanced Materials Technologies, Inc. - USA; Aero & Industrial
Technology - UK; Aetc Ltd./ - UK; Alfa Laval - UK; AlliedSignal - US; Bailey
Automation PLC - UK; Baird Analtical - USA; Baker/MO Services Inc. - USA; Bales
Scientific Inc. - USA; Bently Nevada - USA; Bosman Powersource B.V. -
Netherlands; Boyce Engineering Int'l. Ltd. - UK; Boyce Engineering International
- - USA; Brush Electrical Machines Ltd. - UK; Chromalloy Gas Turbine - USA;
Concepts ETI, Inc. - USA; Conmec, Inc. - USA; Cooper Energy Services - USA;
Cooper Rolls - USA; Demag Delaval Turbomachinery Corp. - USA; Dresser Rand Turbo
Products Division - USA; Ebara Corporation - Japan; Elbar BV - Netherlands;
European Gas Turbines Ltd. - UK; Fern Engineering, Inc. - USA; Fiat Avio S.P.A.
- - Italy; Gas-Path Technology, Inc. - USA; Hickham Industries, Inc. - USA;
Hitachi - Japan; Honeywell Solid State Electric Center - USA; HSDE - UK; IHI-
Japan; John Brown / Kvearner Engineering - UK; Kawasaki - Japan; Liburdi
Engineering Ltd. - Canada; Man Gutehoffnungshutte AG - Germany; Mannesmann Demag
Veidichter - Germany; McGuffy Systems, Inc. - USA; Mitsubishi Heavy Industries -
Japan; Moog Controls - USA; Natole Turbine Enterprises, Inc. - USA; Ormat
Industries Ltd. - Israel; Petrotech, Inc. - USA; Polytec P.I. Inc. - USA; Powmat
Ltd - USA;
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Pratt & Whitney - USA; Precision Castparts Corp. - USA; Preco Turbine Services
Inc. - USA; Rolls-Royce Industrial & Marine - UK; Senior Thermal Engineering -
UK; Sermatech International Inc. - USA; Siemens-Westinghouse Power Corp. - USA;
Solar Turbines Incorporated - USA; SPE Mashproekt - Ukraine; Stork RMO BV -
Netherlands; Sulzer Turbo - Germany; Thomassen International B.V. -Netherlands;
Toshiba - Japan; Triconex Systems, Inc. - USA; Turbine Controls Ltd. - UK;
Turbine Technology Services Corp. - USA; Wilson & Daleo Inc. -Canada; Wood Group
Gas Turbines Ltd. - UK.
"Governmental Authority" means any foreign, federal, territorial,
state or local governmental authority, quasi-governmental authority,
instrumentality, court, commission or tribunal or any regulatory, administrative
or other agency, or any political or other subdivision, department or branch of
any of the foregoing.
"IRS" means the U.S. Internal Revenue Service.
"LLC Agreement" means this Amended and Restated Limited Liability
Company Agreement, as it may be amended from time to time in accordance with its
terms.
"Majority Interest" means one or more Members having among them at
least fifty-one percent (51%) of the Membership Interests of all Members.
"Material Adverse Effect" means, with respect to any event, occurrence
or condition, or series of events, occurrences or conditions, a material adverse
effect on the operations, property or financial condition of the affected
business or entity taken as a whole.
"Material Breach" means a breach by GEOSP or PP, as the case may be,
of this LLC Agreement which breach, if not cured, would have a Material Adverse
Effect on the Company or the non-breaching party. A Material Breach shall not
exist for purposes of this definition unless the non-breaching party has given
written notice of such breach to the breaching party and (i) the party in
Material Breach fails to cure the subject default within 120-days of the receipt
of such notice or (ii) if such default cannot reasonably be cured within such
120-day period, (A) the party in Material Breach fails promptly to take and
continue to take all reasonable steps to cure the default as promptly as
practicable after receipt of such notice or (B) at the end of such 120-day
period it appears that the breaching party will not be able to cure the Material
Breach within a commercially reasonable time (not to exceed an additional 60
days); provided that the foregoing notice and cure periods shall not apply to a
particular provision of this LLC Agreement if other such periods are specified
in such provision.
"Members" means GEOSP and PP and any Person hereafter admitted to the
Company as a member as provided in this LLC Agreement.
"Membership Interest" means the interest of a Member (expressed as a
percentage) in the Company. Membership Interests will be varied only as
specifically agreed by the parties and will not be affected by allocations of
Profits and Losses or other changes in Members' Capital Accounts.
"Officer" means any individual appointed to act as the President or
any other officer appointed by the Committee pursuant to this LLC Agreement.
-4-
<PAGE>
"Operating Plan" means the operating plan of the Company attached to
this LLC Agreement in Exhibit 3.
"PEM Fuel-Cell Powered Generator Set" means a proton exchange membrane
("PEM") fuel cell stack packaged with a fuel processor (to convert fuel at
standard available pressure and quality to fuel usable by the fuel cell stack),
with maximum continuous output no greater than 35 kW, and all of the ancillary
components, systems, electronics, batteries, controls, protective relaying
(e.g., over/under current, transfer switch), and enclosure(s) required to be
ready for indoor or outdoor installation and operation for stand alone or grid
interconnected stationary power applications.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"PP Disclosure Schedule" means the Disclosure Schedule provided by PP
to GEOSP on the date of signing of this LLC Agreement.
"Pre-Commercial Unit" means a 7kW output PEM Fuel Cell-Powered
Generator Set manufactured by PP and meeting the specifications outlined in
Schedule B to the Distributor Agreement, without changes or additions (other
than standard installation materials - e.g., ducting, pipe, wire) by the Company
and/or the Company's designated service provider.
"Products" means the following items manufactured by or on behalf of
PP: PEM Fuel-Cell Powered Generator Sets, without changes or additions (other
than standard installation materials - e.g., ducting, pipe, wire), and
components (e.g., fuel processor, fuel cell stack, power electronics),
replacement parts, upgrades, accessories (e.g., combined power and hot water
packages), and improvements, of various sizes no larger than 35kW of maximum
continuous output that (A) meet the Commercial Unit specifications set forth in
Schedule B of the Distributor Agreement, and (B) are designed for use in
residential, commercial, and industrial stationary power applications (e.g.,
base load power, peaking power, emergency back-up power, enhanced power quality,
cogeneration, trailer-mounted units for temporary stationary power and/or rental
power use); and
"Products" excludes the following, regardless of their manufacturer:
(i) PEM Fuel-Cell Powered Generator Sets and/or components designed
for use in transportation or vehicle applications;
(ii) PEM Fuel-Cell Powered Generator Sets and/or components designed
for use in extended run, uninterruptible power supply ("UPS") systems for
data centers applications, where the PEM Fuel-Cell Powered Generator Set
(A) produces DC or AC premium (i.e., superior power quality to the grid)
power for data center supporting information technology ("IT") equipment,
(B) does not provide power to the entire facility, (C) is installed at a
sub-panel downstream from the Customer's main distribution panel, (D) is
designed to enable remote IT equipment shutdown and power cycling
-5-
<PAGE>
for IT equipment that is no longer responding to commands, and (E) is
designed to promote reliability over efficiency;
(iii) PEM Fuel-Cell Powered Generator Sets and/or components for
rack-mounted equipment in telecommunications, cellular, or cable television
applications; and
(iv) PEM Fuel-Cell Powered Generator Sets and/or components that are
integrated with another device that utilizes all of the electrical output
of the Fuel-Cell Powered Generator Set for that specific device only (e.g.,
an air conditioner powered by a Fuel-Cell Powered Generator Set, but not a
combined Fuel-Cell Powered Generator Set-chiller cogen unit).
"Profits" and "Losses" mean, for each Fiscal Year or other period, an
amount equal to the Company's taxable income or loss for such year or period,
determined in accordance with Section 703(a) of the Code (for this purpose, all
items of income, gain, loss, or deduction required to be stated separately
pursuant to Section 703(a)(1) of the Code shall be included in taxable income or
loss), with the following adjustments:
(i) Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Profits or Losses
pursuant to this definition shall be added to such taxable income or loss
and any related expenses not allowed as a deduction pursuant to Section 265
of the Code shall be subtracted from such taxable income or loss;
(ii) Any expenditures of the Company described in Section
705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) of the Code
expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not
otherwise taken into account in computing Profits or Losses pursuant to
this definition shall be subtracted from such taxable income or loss; and
(iii) Notwithstanding any other provision of this definition, any
items which are specially allocated pursuant to Exhibit B to this LLC
Agreement shall not be taken into account in computing Profits or Losses.
"Seconded Employees" means the employees of GEOSP (or an Affiliate of
GEOSP) or PP who are seconded to the Company pursuant to Annex C to this LLC
Agreement.
"Secondment" means the temporary assignment of an employee of GEOSP,
its Affiliate, or PP to work for the Company pursuant to Annex C without
changing such employee's status as an employee of GEOSP, its Affiliate, or PP,
as the case may be.
"Services" means the following activities associated with the
Products: installation; permitting; application engineering; operation; routine
maintenance; unscheduled maintenance; repair; overhaul (e.g., stack
replacement); upgrade; remote monitoring, diagnostics and/or control (i.e.,
dispatch); operator and customer training; customer service; customer support.
"Strategic Plan" means the strategic plan of the Company attached to
this LLC Agreement in Exhibit 3.
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<PAGE>
"Substitute Member" means any Person not a Member of the Company
(prior to the transfer of a Membership Interest to such Person) to whom a
Membership Interest in the Company has been transferred and who has been
admitted to the Company as a Member pursuant to and in accordance with the
provisions of Section 4.4 of this LLC Agreement.
"Supermajority Transaction" means a Supermajority Transaction defined
as such in Section 7.1 of this LLC Agreement.
"Territory" means every country, province, territory or other
principality in the world, except the States of Michigan, Indiana, Ohio, and
Illinois in the United States of America while Edison Development Corporation
has exclusive rights to market and sell products similar to Products and provide
services similar to Services therein. In the event that Edison Development
Corporation ("EDC") shall lose all of its rights to market and sell similar
products and provide similar services in the States of Michigan, Indiana, Ohio
and Illinois (the "EDC Territory"), this definition of "Territory" shall be
expanded to include the EDC Territory. In the event that EDC shall lose its
exclusive rights to market and sell similar products and provide similar
services in the EDC Territory, the Company will have the rights to market and
sell Products and provide Services in the EDC Territory on a non-exclusive
basis.
"Test & Evaluation Unit" means a pre-commercial version of the Product
with performance (e.g., efficiency, emissions, size, noise, reliability) below
that of a Pre-Commercial Unit, which is intended to demonstrate proof of concept
and provide the manufacturer with field test data.
(b) "To the best of an entity's knowledge" or "to the knowledge of an
entity" (or any similar phrase) means (i) with respect to GEOSP, to the best of
the knowledge of (or to the knowledge of, as the case may be) the President of
GEOSP, and (ii) with respect to PP, to the best of the knowledge of (or to the
knowledge of, as the case may be) the President and CEO and the General Counsel
of PP.
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<PAGE>
Annex B
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REPRESENTATIONS AND WARRANTIES
------------------------------
The following representations and warranties which relate to PP, its
assets and businesses are made solely by PP to and in favor of GEOSP and the
Company, and the representations and warranties which relate to GEOSP, its
assets and businesses are made solely by GEOSP to and in favor of PP and the
Company. Neither GEOSP nor PP makes any representation with respect to
representations of the other party:
1. Existence and Power. Each of GEOSP and PP is duly formed,
-------------------
validly existing and in good standing under the laws of the state of its
formation and has all power and authority and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted, except where the failure to have such licenses, authorizations,
consents and approvals would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. Each party is duly qualified to do
business as a foreign limited liability company in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
2. Authorization. The execution, delivery and performance by each
-------------
party of this LLC Agreement and each of the Ancillary Agreements to which it is
or will be a party and the consummation by such party of the Contemplated
Transactions are within its corporate powers and have been duly authorized by
all necessary corporate action on its part. This LLC Agreement and each of the
Ancillary Agreements to which it is or will be a party constitutes a legal,
valid and binding agreement of such party enforceable against such party in
accordance with its terms, (i) except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally, including the
effect of statutory and other laws regarding fraudulent conveyances and
preferential transfers, and (ii) subject to the limitations imposed by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding at law or in equity).
3. Governmental Authorization. The execution, delivery and
--------------------------
performance by each party of this LLC Agreement and each of the Ancillary
Agreements to which it is or will be a party require no action by or in respect
of, or consent or approval of, or filing with, any Governmental Authority other
than: (i) any actions, consents, approvals or filings otherwise expressly
referred to in this LLC Agreement or in an Ancillary Agreement; or (ii) where
the failure to take any such actions, obtain any such consents or approvals or
make any such filings would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
4. Non-Contravention. The execution, delivery and performance by
-----------------
each party of this LLC Agreement and each of the Ancillary Agreements to which
it is or will be a party and its completion of the Contemplated Transactions do
not and will not (i) contravene or conflict with such party's organizational
documents, (ii) assuming compliance with the matters referred to in Section 3 of
this Annex B, contravene or conflict with or constitute a violation of any
provision of any Applicable Law, (iii) assuming compliance with the matters
referred to in Section 3 of this Annex B, constitute a default under, or give
rise
-1-
<PAGE>
to any right of termination, cancellation or acceleration of any right or
obligation of GEOSP or PP, as the case may be, or to a loss of any benefit to
which GEOSP or PP is entitled under, any agreement, contract or other instrument
binding upon GEOSP or PP or by which any of its properties or assets is or may
be bound or any license, franchise, permit or similar authorization held by
GEOSP or PP except, in the case of clauses (ii) and (iii), for any such
contravention, conflict, violation, default, termination, cancellation,
acceleration or loss that would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
5. Litigation; Disputes. There is no action, suit, investigation or
--------------------
proceeding pending against, or, to the best of the knowledge of the applicable
party, threatened against, or affecting PP or GEOSP before any court or
arbitrator or any governmental body, agency, official or authority which, if
adversely determined or resolved, may reasonably be expected to result in
liability or loss to the Company in excess of $50,000 or which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the
Contemplated Transactions. No dispute or claim exists between PP or GEOSP and
any of their respective customers, suppliers, packagers or distributors
(including warranty claims) which is reasonably likely to have a Material
Adverse Effect on the Company.
6. Distributor and Sales Representative Agreements. Except for the
-----------------------------------------------
Distribution Agreement with Edison Development Corporation dated June 27, 1997,
a true and complete copy of which has been delivered to GEOSP, PP has not
entered into any distributor or sales representative agreements with respect to
the Products or Pre-Commercial Units. Such agreement is in full force and
effect, is a legal, valid and binding obligation of PP and, to the knowledge of
PP, each other party thereto, enforceable against PP and, to the knowledge of
PP, each such other party in accordance with its terms (except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to or affecting creditors' rights
generally, including the effect of statutory and other laws regarding fraudulent
conveyances and preferential transfers, and subject to the limitations imposed
by general equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity), and neither PP nor, to the
knowledge of PP, any other party thereto, is in material default or has failed
to perform any material obligation thereunder, and there does not exist any
event, condition or omission which would constitute a material breach or
material default (whether by lapse of time or notice or both), except for any
such default, failure or breach that would not have a Material Adverse Effect on
either PP's fuel cell business or the Company. GEOSP has not entered into any
distributor or sales representative agreements with respect to PEM Fuel Cell-
Powered Generator Sets.
7. Finders' Fees. There is no investment banker, broker, finder or
-------------
other intermediary which has been retained by or is authorized to act on behalf
of such party who or which might be entitled to any fee or commission from such
party or any of its Affiliates upon consummation of the Contemplated
Transactions.
8. Compliance with Laws. Except for violations or infringements as
--------------------
have not had and would not have a Material Adverse Effect on the Company, the
operations of GEOSP's and PP's businesses have not violated or infringed, and do
not violate or infringe, in any material respect, any Applicable Law or any
order, writ, injunction or decree of any Governmental Authority.
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<PAGE>
9. Investment Representation. Each party is acquiring its interest
-------------------------
in the Company solely for investment purposes and not with a view to the
distribution or resale thereof and acknowledges that its purchase of such
interest is expressly subject to the conditions and limitations on
transferability set forth in the LLC Agreement.
10. Ownership of PP. PP represents and warrants to GEOSP that (a)
---------------
Edison Development Corporation and Mechanical Technology Incorporated ("MTI")
own all of the outstanding membership interests in PP, free and clear of all
liens, and (b) there is not outstanding any option or right of any party to
acquire any equity interest in PP or any commitment to issue or deliver any such
option or right or interest, except for (i) stock options issued to employees
and board members (as of August 21, 1998, this amounted to 1,772,300 shares of
Class B Membership Interest of PP) and (ii) options purchased by MTI to purchase
250,000 shares of Class A Membership Interest at $1.00 per share, which must be
exercised by April 24, 1999, and to purchase 2,000,000 shares of Class A
Membership Interest at $1.00 per share, which must be exercised by June 15,
1999.
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<PAGE>
Annex C
-------
EMPLOYMENT AND SECONDMENT MATTERS
---------------------------------
ARTICLE 1
DEFINED TERMS
1.1 Definitions.
-----------
1.1.1 Committee means the committee established by GEOSP and PP, in accordance
with Section 7.2 of the Amended and Restated Limited Liability Company Agreement
between GEOSP and PP dated February ___, 1999, to conduct the affairs of the
Company on their behalf and as their representatives.
1.1.2 Employees means individuals employed directly by the Company itself,
rather than individuals seconded to the Company, who remain employed by PP,
GEOSP or their Affiliates (other than the Company).
1.1.3 GE, for purposes of this Annex C, means General Electric Company and its
Affiliates, including GEOSP.
1.1.4 Governmental Regulations means any statute, rule, regulation, decree,
executive order, preliminary or permanent injunction or court order issued by a
Governmental Authority. A reference to a statutory provision includes the
regulations and other instruments under it.
1.1.5 Party or Parties means, as the context may require, PP, GEOSP, or the
Company or all of the foregoing.
1.1.6 Third Party means any Person other than a Party.
1.2 References to Exhibits, etc. The reference to Article, Exhibit or Schedule
----------------------------
shall be the Articles of this Annex C and the Exhibits and Schedules attached
hereto which are incorporated as an integral part of this Annex C.
1.3 Other Capitalized Terms. Other capitalized terms used in this Annex C but
-----------------------
not defined in this Article shall have the meanings given them in Annex A or
wherever such terms first appear in this Annex C.
ARTICLE 2
GENERAL PROVISIONS
The purpose of this Annex C is to define the terms and conditions relating to
the employment of Employees and the secondment of Seconded Employees by the
Company.
<PAGE>
ARTICLE 3
RECRUITMENT AND SELECTION OF EMPLOYEES
3.1 Recruitment. PP and GEOSP may, if they desire, advertise open positions
-----------
within their personnel management systems, route employment applications through
appropriate channels in PP or GEOSP and forward such applications to the
Company. In such cases the Company shall consult with PP or GEOSP about the job
qualifications and service obligations of all such potential Company personnel.
The Company may also advertise position openings in local newspapers and
employment exchanges. The Persons listed on Exhibit A attached hereto are
intended to constitute the initial management of the Company. GEOSP and PP
shall use all reasonable efforts (which shall not require the incurrence of
significant costs or expenses) to make such Persons available for employment by
or secondment to the Company commencing on the Closing Date.
3.2 Selection of Employees and Seconded Employees. The Company President, or
---------------------------------------------
his or her designee, shall be responsible for selecting job applicants from PP,
GEOSP, their Affiliates, or from other sources to fill the open positions for
Employees or Seconded Employees. Applicants for open positions shall be
selected based on their qualifications for the positions. Prior to the
secondment to the Company of any proposed Seconded Employee, such proposed
Seconded Employee will be required to enter into a binding commitment in writing
with PP or GEOSP (as the case may be) as trustee on behalf of the Company, in
the form set forth in Exhibit B to this Annex C.
3.3 Termination of Employees and Seconded Employees. The Company President may
-----------------------------------------------
terminate Employees, instruct PP to remove PP Seconded Employees and instruct
GEOSP to remove GEOSP Seconded Employees; and, if so instructed, PP and GEOSP
shall remove their respective Seconded Employees from the Company.
3.4 Transition. A transition plan will be developed and mutually agreed to by
----------
the Parties in order to provide an orderly transition of PP or GEOSP employees
to the Company.
ARTICLE 4
REMUNERATION OF COMPANY EMPLOYEES
4.1 Salaries of Company Employees. The Company shall remunerate its Employees
-----------------------------
in accordance with a wage and salary structure which is competitive in the
locality where the Employee will be working and consistent with the goals of the
Company. An annual salary increase plan will be recommended by the Company
President and implemented after approval of the Committee.
4.2 Benefits of Company Employees. Employees of the Company shall be entitled
-----------------------------
to receive the benefits package recommended by the Company President and
approved by the Committee. Such benefits package will be, at a minimum, that
which is required by law and, where not required by law, in the Company's sole
discretion. Changes in the benefits package shall be recommended by the Company
President and implemented after approval of the Committee.
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<PAGE>
ARTICLE 5
COMPANY POLICIES AND TRAINING
5.1 Company Policies and Procedures. All personnel covered by this Annex C
-------------------------------
shall be given written copies of all Company policies, and such policies of PP
or GEOSP as required by PP or GEOSP, trained in the use and implementation of
such policies, and required to agree that they will perform their duties in
strict accordance with such policies. Similarly, all personnel covered by this
Annex C shall have a written copy available to them of all Company procedures
that may reasonably apply to such person and be trained in the use and
implementation of such procedures
5.2 Training. The Parties agree that all personnel covered by this Annex C
--------
shall be adequately trained to perform the duties of their job and to cooperate
to assure that such training is provided by the Company. The Parties further
agree that, in the event such training is not reasonably within the capability
of the Company to provide, PP or GEOSP will provide such training and be
reimbursed by the Company their reasonable or customary cost or fees, as the
case may be, for such training.
5.3 Term of Employment. The Company shall enter employment agreements with
------------------
Employees who are designated to receive specialized training, which shall
provide for a term of employment for a period equal to at least one year.
ARTICLE 6
SECONDED EMPLOYEES
6.1 GEOSP Seconded Employees. GEOSP and each employee seconded from GEOSP or
------------------------
its Affiliate shall be responsible for resolving the manner in which the
employee's period of secondment shall be treated with respect to that person's
pension rights with GE or any of its Affiliates, years in service and what the
seniority rights in GE or any of its Affiliates will be at the end of the
secondment period.
6.1.2 Payment of GEOSP Seconded Employee's Salary and Benefits. During the
--------------------------------------------------------
period of secondment, GEOSP shall be responsible for paying each GEOSP Seconded
Employee's salary and benefits package, including employment taxes, to, in
respect of, or on behalf of the GEOSP Seconded Employee consistent with the
applicable salary and benefit payment policies of GE or any of its Affiliates.
The Company shall pay GEOSP an amount equal to one hundred percent (100%) of
each GEOSP Seconded Employee's salary (prior to the withholding of any taxes),
benefits, and taxes paid by GEOSP to, in respect of, or on behalf of that
employee during the period of the secondment. The foregoing amount paid for
salary, benefits, and taxes shall be adjusted after actual increases in salary,
benefits, and/or taxes paid by GE or any of its Affiliates to, in respect of, or
on behalf of the GEOSP Seconded Employee, provided that GEOSP shall have
produced evidence to the Company of any such actual increases in salary,
benefits, and/or taxes paid by GE or any of its Affiliates. The Company shall
make such payment at the end of the month for which the GEOSP Seconded Employee
will be seconded to the Company. GEOSP shall deliver to the Company copies of
the GEOSP Seconded Employee's most recent salary, benefit, and tax information
at the beginning of the secondment period. GEOSP shall be responsible for
filing all tax, social security and other similar statements for each GEOSP
Seconded Employee as may be required under applicable Governmental Regulations.
Upon request of the Company, GEOSP shall
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<PAGE>
provide the Company with copies of returns, receipts or similar documents
showing that all the taxes and social security payments (if any) have been made
to the applicable Governmental Authorities. GEOSP shall indemnify the Company
against any claims by the GEOSP Seconded Employees or any applicable
Governmental Authority with respect to the payment of wages, salaries, taxes,
social security payments, other payments resulting from the termination of
employment by GE or any of its Affiliates or the proper filing of returns with
the applicable Governmental Authorities with respect to the foregoing.
6.1.3 GEOSP Right of Assignment. Rights and obligations with respect to the
-------------------------
secondment of GEOSP Seconded Employees may be transferred (with appropriate
notice to PP and the Company) from or to GEOSP or any of its Affiliates (other
than the Company).
6.2.1 PP Seconded Employees. PP and each employee seconded from PP shall be
---------------------
responsible for resolving the manner in which the employee's period of
secondment shall be treated with respect to that person's pension rights with
PP, years in service and what the seniority rights in PP will be at the end of
the secondment period.
6.2.2 Term of Secondment. Seconded Employees shall be obligated to remain
------------------
seconded to the Company for a period of at least one year, unless agreed
otherwise by the Parties. The Company, PP or GEOSP, as the case may be, and the
Seconded Employee may agree to extend the secondment period for a mutually
agreeable time upon completion of the first secondment period.
6.2.3 Payment of PP Seconded Employee's Salary and Benefits. During the period
-----------------------------------------------------
of secondment, PP shall be responsible for paying the PP Seconded Employee's
salary and benefits package, including employment taxes, to, in respect of, or
on behalf of the PP Seconded Employee consistent with PP salary and benefits
payment policies. The Company shall pay PP an amount equal to one hundred per
cent (100%) of each PP Seconded Employee's salary (prior to withholding of any
taxes), benefits, and taxes paid by PP to, in respect of, or on behalf of that
employee during the period of the secondment. The foregoing amount paid for
salary, benefits, and taxes shall be adjusted after actual increases in salary,
benefits, and/or taxes paid by PP to, in respect of, or on behalf of the PP
Seconded Employee, provided that PP shall have produced evidence to the Company
of any such actual increases in salary, benefits, and/or taxes paid by PP. The
Company shall make such payment at the end of the month for which the PP
Seconded Employee will be seconded to the Company. The Company's benefit
package shall not apply to Seconded Employees. PP shall deliver to the Company
copies of the PP Seconded Employee's most recent salary, benefit, and tax
information at the beginning of the secondment period. PP shall be responsible
for filing all tax, social security and other statements for each PP Seconded
Employee as may be required under applicable Governmental Regulations. Upon
request of the Company, PP shall provide the Company with copies of returns,
receipts or similar documents showing that all the taxes and social security
payments (if any) have been made to the applicable Governmental Authorities. PP
shall indemnify the Company against any claims by the PP Seconded Employees or
any applicable Governmental Authority with respect to the payment of wages,
salaries, taxes, social security payments, other payments resulting from the
termination of employment by PP or the proper filing of returns with any
applicable Governmental Authorities with respect to the foregoing.
6.2.4 PP Right of Assignment. PP shall have the right to assign its rights and
----------------------
obligations (with appropriate notice to GEOSP and the Company) with respect to
the secondment of employees to one of its wholly owned Affiliates.
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<PAGE>
ARTICLE 7
LIMITATION OF LIABILITY
7.1 The Parties agree that each Seconded Employee to the Company by GEOSP or PP
shall, in all respects, be acting for the Company and not GEOSP or PP,
respectively. Nothing contained herein shall constitute or be construed to be
or create a partnership or joint venture between the Company, GEOSP and/or PP.
The debts and liabilities incurred by the Company are those of the Company and,
subject to Clauses 6.1.2 and 6.2.3 above, neither GEOSP nor PP shall have any
liability for them.
7.2 The Company hereby represents that in accepting the secondment of any GEOSP
or PP employee to the Company, it has not relied on any projection of earnings,
statements as to the possibility of future success or other similar matter which
may have been prepared or presented by GEOSP, PP or their Affiliates, and
understands that no guaranty is made or implied by GEOSP or PP as to the future
financial success of the business of the Company.
7.3 Neither GEOSP nor PP shall have any liability to the Company or to any
other Person for any act or omission of the Seconded Employees in connection
with the operation or activities of the Company. Additionally, subject to
Clauses 6.1.2 and 6.2.3 above, at GEOSP's or PP's request, the Company will, at
its own cost and expense, assume the defense of any proceeding brought by any
Third Party to establish any such liability and will indemnify and hold harmless
GEOSP and PP from any such liability and all related costs and expenses,
including attorney's fees.
7.4 As used in this Article, "liability" includes liability for any claim of
any kind whether the claim is based on contract, indemnity, warranty, tort
(including negligence of any degree), strict liability or otherwise for any loss
or damage arising out of or connected with performance or breach of the
provisions of this Annex C or operations of the Company.
7.5 As used in this Article, "GEOSP" and "PP" shall include GE or PP, as the
case may be, and its respective Affiliates and any of their respective officers,
employees or agents, including any officers, employees or agents also seconded
to work in the Company as Seconded Employees.
7.6 The Company shall indemnify GEOSP and PP against Third Party claims arising
out of the acts or omissions of its employees, including Employees and Seconded
Employees.
7.7 The foregoing limitations and indemnity shall apply to the full extent
permitted by law regardless of degree of fault or negligence, and,
notwithstanding any other provisions of this Annex C, shall survive termination
of this LLC Agreement. The limitations contained in Section 10.5(a) of this
LLC Agreement shall also apply to all indemnity provisions of this Annex C, and
the liability of GEOSP and the Company shall be considered together for purposes
of the $1,000,000 limitation in Section 10.5(a).
-5-
<PAGE>
EXHIBIT A
Initial Management of the Company
Barry Glickman President
Frank Scovello Director of Sales
Rick Robertson Director of Marketing
-6-
<PAGE>
EXHIBIT B
(Acknowledgment From Employees of GE and its
Affiliates Concerning Secondment to the Company)
_____________, 1999
_____________________________
_____________________________
_____________________________
RE: Secondment to GE Fuel Cell Systems, L.L.C.
I refer to [our recent discussions/your letter dated _______] concerning my
secondment to GE Fuel Cell Systems, L.L.C., for an initial period of ________.
I hereby acknowledge and agree that I will not, by reason of my secondment,
become an employee of GE Fuel Cell Systems, L.L.C., but shall, throughout my
period of secondment, remain your employee.
I hereby covenant with you (as trustee for and on behalf of GE Fuel Cell
Systems, L.L.C.) that I shall not maintain any claim, nor institute any
proceedings whatsoever against GE Fuel Cell Systems, L.L.C., whether in respect
of breach of contract, redundancy, unfair dismissal, compensation for loss of
office and any other ground whatsoever, whether under common law, statute or
otherwise by reason of any termination of my secondment to GE Fuel Cell Systems,
L.L.C., or the termination of my employment with you.
I hereby confirm that I understand and have considered in full the effect of the
foregoing (and in particular those provisions of this Acknowledgment which may
deprive me of rights) and accept that this Acknowledgment is legally binding on
me. I acknowledge that you have advised me to obtain independent legal advice
prior to execution of this Acknowledgment and I confirm that I have had
sufficient opportunity to take and that I have taken such advice or decided
(without any influence having been brought to bear on me) not to obtain such
advice.
This Acknowledgment shall be governed by and construed in accordance with the
Laws of the State of New York.
Executed by: Witness:
_____________________ _______________________________
-7-
<PAGE>
EXHIBIT B (Continued)
(Acknowledgment From Employees of PP
Concerning Secondment to the Company)
___________, 1999
Plug Power, L.L.C.
968 Albany-Shaker Road
Albany, New York 12110
RE: Secondment to GE Fuel Cell Systems, L.L.C.
I refer to [our recent discussions/your letter dated _______] concerning my
secondment to GE Fuel Cell Systems, L.L.C., for an initial period of ________.
I hereby acknowledge and agree that I will not, by reason of my secondment,
become an employee of GE Fuel Cell Systems, L.L.C., but shall, throughout my
period of secondment, remain an employee of Plug Power, L.L.C.
I hereby covenant with Plug Power, L.L.C. (as trustee for and on behalf of GE
Fuel Cell Systems, L.L.C.) that I shall not maintain any claim, nor institute
any proceedings whatsoever against GE Fuel Cell Systems, L.L.C., whether in
respect of breach of contract, redundancy, unfair dismissal, compensation for
loss of office and any other ground whatsoever, whether under common law,
statute or otherwise by reason of any termination of my secondment to GE Fuel
Cell Systems, L.L.C., or the termination of my employment with Plug Power,
L.L.C.
I hereby confirm that I understand and have considered in full the effect of the
foregoing (and in particular those provisions of this Acknowledgment which may
deprive me of rights) and accept that this Acknowledgment is legally binding on
me. I acknowledge that Plug Power, L.L.C., has advised me to obtain independent
legal advice prior to execution of this Acknowledgment and I confirm that I have
had sufficient opportunity to take and that I have taken such advice or decided
(without any influence having been brought to bear on me) not to obtain such
advice.
This Acknowledgment shall be governed by and construed in accordance with the
Laws of the State of New York.
Executed by: Witness:
______________________ _______________________________
-8-
<PAGE>
EXHIBIT 1
---------
MEMBERSHIP INTERESTS
NAME AND MEMBERSHIP
NOTICE ADDRESS INTEREST
- -------------- --------
GE On-Site Power, Inc. 75%
One River Road
Schenectady, NY 12345
Plug Power, L.L.C. 25%
968 Albany-Shaker Road
Albany, NY 12110
-1-
<PAGE>
EXHIBIT 2
---------
ALLOCATION AND CAPITAL ACCOUNT PROVISIONS
For purposes of interpreting and implementing the LLC Agreement, the
following rules shall apply and shall be treated as part of the terms of the LLC
Agreement:
A. Special Allocation Provisions.
-----------------------------
1. For purposes of determining the amount of gain or loss to be
allocated pursuant to Article VI of the LLC Agreement, any basis adjustments
permitted pursuant to Section 743 of the Code shall be disregarded.
2. Income, loss, deductions and credits shall be allocated to the
Members in accordance with the portion of the Fiscal Year during which the
Members have held their respective interests. All items of income, loss and
deduction shall be considered to have been earned ratably over the period of the
Fiscal Year, except that gains and losses arising from the disposition of assets
shall be taken into account as of the date thereof.
3. Notwithstanding any other provision of the LLC Agreement, to the
extent required by law, income, gain, loss and deduction attributable to
property contributed to the Company by a Member shall be allocated among the
Members so as to take into account any variation between the basis of the
property to the Company and the fair market value of the property at the time of
contribution in accordance with the requirements of Section 704(c) of the Code
and the applicable Treasury Regulations thereunder, as more fully described in
Part B hereof. The Company shall use the traditional method with curative
allocations described in Treasury Regulation Section 1.704-3(c) for purposes of
complying with Section 704(c)(1)(A) of the Code.
4. Notwithstanding any other provision of the LLC Agreement, in the
event the Company is entitled to a deduction for interest imputed under any
provision of the Code on any loan or advance from a Member (whether such
interest is currently deducted, capitalized or amortized), such deduction shall
be allocated solely to such Member.
5. Notwithstanding any provision of the LLC Agreement to the
contrary, to the extent any payments in the nature of fees made to a Member are
finally determined by the IRS to be distributions to a Member for federal income
tax purposes, there will be a gross income allocation to such Member in the
amount of such distribution.
6. (a) Notwithstanding any provision of the LLC Agreement to the
contrary and subject to the exceptions set forth in Section 1.704-2(f)(2)-(5) of
the Treasury Regulations, if there is a net decrease in Partnership Minimum Gain
during any Fiscal Year, each Member shall be specially allocated items of
Company income and gain for such year (and, if necessary, subsequent years) in
an amount equal to such Member's share of the net decrease in Partnership
Minimum Gain determined in accordance with Section 1.704-2(g)(2) of the Treasury
Regulations. Allocations pursuant to the previous sentence shall be
-1-
<PAGE>
made in proportion to the respective amounts required to be allocated to each
Member pursuant thereto. The items to be so allocated shall be determined in
accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Treasury
Regulations. This paragraph 6(a) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(f) of the Treasury Regulations and
shall be interpreted consistently therewith. To the extent permitted by such
Section of the Treasury Regulations and for purposes of this paragraph 6(a)
only, each Member's Adjusted Capital Account Balance shall be determined prior
to any other allocations pursuant to Article VI of the LLC Agreement with
respect to such Fiscal Year and without regard to any net decrease in Partner
Minimum Gain during such Fiscal Year.
(b) Notwithstanding any provision of the LLC Agreement to the
contrary, except paragraph 6(a) of this Exhibit 2 and subject to the exceptions
set forth in Section 1.704-2(i)(4) of the Treasury Regulations, if there is a
net decrease in Partner Nonrecourse Debt Minimum Gain during any Fiscal Year,
each Member who has a share of the Partner Nonrecourse Debt Minimum Gain,
determined in accordance with Section 1.704-2(i)(5) of the Treasury Regulations,
shall be specially allocated items of Company income and gain for such Fiscal
Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such
Member's share of the net decrease in Partner Nonrecourse Debt Minimum Gain,
determined in accordance with Section 1.704-2(i)(4) of the Treasury Regulations.
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Member pursuant thereto.
The items to be so allocated shall be determined in accordance with Sections
1.704-2(i)(4) and 1.704-2(j)(2) of the Treasury Regulations. This paragraph
6(b) is intended to comply with the minimum gain chargeback requirement in such
Sections of the Treasury Regulations and shall be interpreted consistently
therewith. To the extent permitted by such Sections of the Treasury
Regulations, and solely for purposes of this paragraph 6(b), each Member's
Adjusted Capital Account Balance shall be determined prior to any other
allocations pursuant to Article VI of the LLC Agreement with respect to such
Fiscal Year, other than allocations pursuant to paragraph 6(a) hereof.
7. (a) Notwithstanding any provision of the LLC Agreement to the
contrary, in the event any Member unexpectedly receives any adjustments,
allocations or distributions described in Treasury Regulation Section 1.704-
1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6), items of
Company income and gain shall be specially allocated to such Members in an
amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations, the deficits in their Adjusted Capital Account Balances
created by such adjustments, allocations or distributions as quickly as
possible, provided that an allocation pursuant to this paragraph 7(a) shall be
made only if and to the extent that such Members would have a deficit Adjusted
Capital Account Balance after all other allocations provided for in the LLC
Agreement and this Exhibit 2 have been tentatively made as if this paragraph
7(a) were not in the LLC Agreement or incorporated thereinto.
(b) In the event any Member has a deficit Capital Account at the
end of any Fiscal Year which is in excess of the sum of (i) the amount such
Member is obligated to restore pursuant to any provision of the LLC Agreement,
and (ii) the amount such Member is deemed to be obligated to restore pursuant to
the penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the
Treasury Regulations, each such Member shall be specially allocated items of
Partnership income and gain in the amount of such excess as quickly as possible,
provided that an allocation pursuant to this paragraph 7(b) shall be made only
if and to the extent that such Member would have a deficit Capital Account in
excess of
-2-
<PAGE>
such sum after all other allocations provided for in the LLC Agreement and this
Exhibit 2 have been made as if paragraph 7(a) hereof and this paragraph 7(b)
were not in the LLC Agreement or incorporated thereinto.
8. To the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Section 734(b) or Section 743(b) of the Code is
required, pursuant to Section 1.704-1(b)(2)(iv)(m)(2) or Section 1.704-
1(b)(2)(iv)(m)(4) of the Treasury Regulations, to be taken into account in
determining Capital Accounts as the result of a distribution to a Member in
complete liquidation of its interest in the Company, the amount of such
adjustment to Capital Accounts shall be treated as a item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to the
Members in accordance with their interest in the Company in the event that
Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom
such distribution was made in the event that Section 1.704-1(b)(2)(iv)(m)(4) of
the Treasury Regulations applies.
9. No loss shall be allocated to any Member to the extent that such
allocation would result in a deficit in its Adjusted Capital Account Balance
while any other Member continues to have a positive Adjusted Capital Account
Balance; in such event losses shall first be allocated to any Members with
positive Adjusted Capital Account Balances, and in proportion to such balances,
to the extent necessary to reduce their positive Adjusted Capital Account
Balances to zero. Any allocation of loss pursuant to this paragraph 9 shall be
offset in subsequent years on a last-in first-out priority basis by special
allocations of income in the corresponding amounts.
10. Any special allocations of items pursuant to this Part A (the
"Regulatory Allocations") shall be taken into account in computing subsequent
allocations so that the net amount of any items so allocated and the Profits,
Losses and all other items allocated to each such Member pursuant to Article VI
of the LLC Agreement shall, to the extent possible, be equal to the net amount
that would have been allocated to each such Member pursuant to the provisions of
Article VI of the Agreement if such Regulatory Allocations had not occurred.
11. Notwithstanding any provision of the LLC Agreement to the
contrary, Nonrecourse Deductions for any Fiscal Year or other period shall be
specially allocated to the Members pro rata in accordance with their respective
Membership Interests.
12. Notwithstanding any provision of the LLC Agreement to the
contrary, any Member Nonrecourse Deduction for any Fiscal Year or other period
shall be specially allocated to the Member who bears the economic risk of loss
with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Section 1.704-2(i) of the
Treasury Regulations.
B. Capital Account Adjustments.
---------------------------
1. For purposes of computing the amount of any item of income, gain,
deduction or loss to be reflected in the Members' Capital Accounts, the
determination, recognition and classification of any such item shall be the same
as its determination, recognition and classification for federal income tax
purposes; provided, however, that:
-3-
<PAGE>
(a) Any deductions for depreciation, cost recovery or amortization
(other than depletion under Section 611 of the Code) attributable to
property contributed by a Member to the capital of the Company shall be
determined as if the adjusted basis of such property on the date it was
acquired by the Company was equal to the fair market value of the property
as determined by the Members pursuant to Part B.7(a) hereof using such
reasonable methods of valuation as they may adopt. Upon an adjustment to
the Carrying Value of any Company property (other than property subject to
depletion under Section 611 of the Code), any further deductions for such
depreciation, cost recovery or amortization attributable to such property
shall be determined as if the adjusted basis of such property was equal to
the Carrying Value of such property immediately following such adjustment.
(b) Any income, gain or loss attributable to the taxable disposition
of any property (including any property subject to depletion under Section
611 of the Code) shall be determined by the Company as if the adjusted
basis of such property as of such date of disposition was equal in amount
to the Company's Carrying Value with respect to such property as of such a
date.
(c) The computation of all items of income, gain, loss and deduction
shall be made by the Company and, as to those items described in Section
705(a)(1)(B) or Section 705(a)(2)(B) of the Code, or treated as Section
705(a)(2)(B) expenditures pursuant to Section 1.704-1(b)(2)(iv)(i) of the
Treasury Regulations, without regard to the fact that such items are not
includable in gross income or are neither currently deductible nor
capitalizable for federal income tax purposes.
2. A transferee of a Membership Interest will succeed to the Capital
Account relating to the Membership Interest transferred.
3. Upon an issuance of additional Membership Interests for cash or
property, the Capital Accounts of all Members (and the Carrying Values of all
Company properties) shall, immediately prior to such issuance, be adjusted
(consistent with the provisions hereof) upward or downward to reflect any
unrealized gain or unrealized loss attributable to each Company property (as if
such unrealized gain or unrealized loss had been recognized upon an actual sale
of such property at the fair market value thereof, immediately prior to such
issuance, and had been allocated to the Members, at such time, pursuant to
Article VI of the Agreement). In determining such unrealized gain or unrealized
loss attributable to the properties, the fair market value of Company properties
shall be determined by the Members pursuant to Part B.7(a) hereof using such
reasonable methods of valuation as they may adopt.
4. Immediately prior to the distribution of any Company property in
liquidation of the Company, or the distribution by the Company to a Member of
any Company property as consideration for an interest in the Company, the
capital accounts of all Members (and the Carrying Values of all Company
properties) shall be adjusted (consistent with the provisions hereof and Section
704 of the Code) upward or downward to reflect any unrealized gain or unrealized
loss attributable to each Company property (as if such unrealized gain or
unrealized loss had been recognized upon an actual sale of each such property,
immediately prior to such distribution, and had been allocated to the Members,
at such time, pursuant to Article VI of the Agreement). In determining such
unrealized gain or unrealized loss attributable to the properties, the fair
market value of Company properties shall be determined by the Members pursuant
to Part B.7(a) hereof using such reasonable methods of valuation as they may
adopt.
-4-
<PAGE>
5. In the event the value of any Company asset is adjusted as
described in paragraph 3 or 4 above, subsequent allocations of income, gain,
loss and deduction with respect to such asset shall take account of any
variation between the value and the adjusted basis of such asset for federal
income tax purposes in the same manner as under Section 704(c) of the Code and
the Treasury Regulations thereunder.
6. Any elections or other decisions relating to such allocations
shall be made by the Committee in any manner that reasonably reflects the
purpose and intention of the LLC Agreement.
7. The following actions shall require the consent of the holder(s)
of a majority of outstanding membership interests:
(a) the valuation of any non-cash property contributed to the
Company by a Member, or distributed to a Member by the Company, and the
valuation of all the assets of the Company if required for purposes of computing
the Members' Capital Accounts pursuant to the Regulations under Section 704 of
the Code; and
(b) the distribution by the Company to a Member of non-cash
property which had been previously contributed by a Member to the capital of the
Company, provided such distribution is made within the seven year period
following the date on which the property was contributed to the Company and such
distribution, if made, would cause the recognition of taxable income or gain
under Section 704(c)(1)(B) or Section 737 of the Code.
C. Definitions. For the purposes of this Exhibit 2, the following terms
-----------
shall have the meanings indicated unless the context clearly indicates
otherwise:
"Adjusted Capital Account Balance": means the balance in the Capital
--------------------------------
Account of a Member as of the end of the relevant Fiscal Year, after giving
effect to the following: (a) credit to such Capital Account any amounts the
Member is obligated to restore, pursuant to the terms of the Agreement or
otherwise, or is deemed obligated to restore pursuant to the penultimate
sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Treasury
Regulations, and (b) debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Treasury Regulations.
"Carrying Value": means (a) with respect to property contributed by a
--------------
Member to the capital of the Company, the value of such property reduced (but
not below zero) by all amortization, depreciation and cost recovery deductions
charged to the Members' Capital Accounts with respect to such property, as well
as any other charges for sales, retirements and other dispositions of assets
included in property, as of the time of determination, and (b) with respect to
any other property, the adjusted basis of that property for federal income tax
purposes as of the time of determination. The Carrying Value of any property
shall be adjusted in accordance with the principles set forth herein.
"Nonrecourse Deductions": shall have the meaning set forth in Section
----------------------
1.704-2(b)(1) of the Treasury Regulations. The amount of Nonrecourse Deductions
for a Fiscal Year equals the excess, if any, of the net increase, if any, in the
amount of Partnership Minimum Gain during that Fiscal Year over the aggregate
amount of any distributions during that Fiscal Year of proceeds of a Nonrecourse
Liability that are
-5-
<PAGE>
allocable to an increase in Partnership Minimum Gain, determined according to
the provisions of Section 1.704-2(c) of the Treasury Regulations.
"Nonrecourse Liability": shall have the meaning set forth in Section
---------------------
1.704-2(b)(3) of the Treasury Regulations.
"Partner Nonrecourse Debt Minimum Gain": means an amount, with
-------------------------------------
respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain
that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Section 1.704-2(i)(3) of the Treasury
Regulations.
"Partner Nonrecourse Debt": shall have the meaning set forth in
------------------------
Section 1.704-2(b)(4) of the Treasury Regulations.
"Partner Nonrecourse Deductions": shall have the meaning set forth in
------------------------------
Sections 1.704-2(i)(1) and (2) of the Treasury Regulations. The amount of
Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a
Fiscal Year equals the excess, if any, of the net increase, if any, in the
amount of Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt during that Fiscal Year over the aggregate amount of any
distributions during the Fiscal Year to the Member that bears the economic risk
of loss for such Partner Nonrecourse Debt to the extent such distributions are
from the proceeds of such Partner Nonrecourse Debt and are allocable to an
increase in Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Section 1.702-2(i)(2) of the
Treasury Regulations.
"Partnership Minimum Gain": shall have the meaning set forth in
------------------------
Sections 1.704-2(b)(2) and 1.704-2(d) of the Treasury Regulations.
"Treasury Regulations" or "Treas. Reg." shall include temporary and
-------------------- -----------
final regulations promulgated under the Code in effect as of the date of filing
the Certificate and the corresponding sections of any regulations subsequently
issued that amend or supersede those regulations.
For purposes of this Exhibit, all other capitalized terms will have
the same definition as in the LLC Agreement.
-6-
<PAGE>
EXHIBIT 3
---------
STRATEGIC PLAN AND OPERATING PLAN
(See Attached)
<PAGE>
GE FUEL CELL SYSTEMS, LLC
OPERATING PLAN
JANUARY 1999
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
1999
----------
Unit Sales
- # of Units [***]
- Average Unit Size (kW) 7
- # of MW [***]
- Installed Base (MW) [***]
Transfer Price (= JV COGS per Unit) [***]
Sales Price ($ per Unit)* [***]
Revenues
- Unit Sales ($MM) [***]
- Installation ($MM) [***]
- Revenue ($ per Unit) [***]
- JV Market Share (%) [***]
- Maintenance ($MM) [***]
- Revenue ($ per Unit) [***]
- JV Market Share (%) [***]
- Franchise Fees ($MM) [***]
- Total ($MM) [***]
Gross Margin ($MM)
- Unit Sales [***]
- Installation [***]
- Maintenance [***]
- Franchise Fees [***]
- Total [***]
- Total (% of Revenues) [***]
Operating Expenses ($MM)**
- Sales [***]
- # of Dedicated Sales People [***]
- Salary (plus benefits)/Person [***]
- Sales Commission (% of GM) [***]
- Sales Commission [***]
- Travel [***]
- Technical Support [***]
- # of People [***]
- Salary (plus benefits)/Person [***]
- Marketing (people, shows, brochures, etc.) [***]
- R&D (electronics, testing) [***]
- G&A (office space, legal/finance support) [***]
- Consulting/Market Research [***]
- Non-warranty service/unit replacements [***]
- Total [***]
- Total (% of Revenues) [***]
Operating Margin ($MM)
- Total [***]
- Total (% of Revenues) [***]
<PAGE>
GE FUEL CELL SYSTEMS, LLC
STRATEGIC PLAN
JANUARY 1999
<PAGE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED MATERIALS HAVE BEEN INDICATED WITH
ASTERISKS.
OVERVIEW
GE Fuel Cell Systems, L.L.C. (hereafter the "Company") is being formed to
market, install, and service proton exchange membrane (PEM) fuel cell systems
designed and manufactured by Plug Power, L.L.C. (hereafter "PP"). The Company
will be PP's distributor of fuel cell systems for residential and small
commercial and industrial (C&I) power applications less than or equal to 35kW,
certain defined exclusions. Except for the distribution rights previously
granted to DTE Energy (parent company of Detroit Edison) for Michigan, Illinois,
Indiana, and Ohio, the Company will be PP's exclusive, global distributor.
Ownership of the Company is split 75%/25% between GE On-Site Power, Inc.
(hereafter "GEOSP") and PP.
PRODUCT
The Company's initial efforts will focus on PP's residential-sized fuel
cel1 product, the "Plug Power 7000." When fully commercialized this product this
product will provide 100% of the power requirements of a target household, or
approximately 2-4kW of baseload power, 10-15kW of peak power, and [***]kWh/year
of energy. Power will be generated from the fuel cell "stack" with batteries
providing supplementary power to meet short-term power surges. The unit will run
on natural gas, propane, or methanol, and will be 40% efficient (8,500 Btu/kWh)
in typical baseload operation. Unlike traditional power generators, efficiency
falls with increased output above the optimal design point.
The Company expects to use 1999 to conduct additional market research on
typical residential and C&I power usage, tariff structures, fuel availability,
fuel prices, buying criteria, etc. in order to better understand (1) Requisite
product features by geography and customer segment (e.g., baseload power
requirement vs. instantaneous requirement), (2) Acceptable customer payback
periods, and (3) Regulatory requirements, etc. The Company will use this data
to define the optimal unit sizes, determine the mix between fuel cell-supplied
and battery-supplied output, and revise, as needed, performance specifications
by geography/customer segment, etc.
RESIDENTIAL FUEL CELL MARKET
The Company has conducted a preliminary evaluation of target markets and
customers taking into account such factors as average household demand, ability
to pay, power availability/quality, availability of fuel, grid power vs. fuel
price spreads, penetration of competing distributed generation (DG) technologies
(e.g., reciprocating engine generators), new capacity requirements, and the cost
of new capacity additions (including transmission and distribution). Based on
this evaluation, the Company believes the available global market for PP's
residential-sized fuel cells will be over 20,000,000 households by 2005. The
market size in the initial commercial period (i.e., 2001 to 2003) will be
smaller due to customers' technology validation concerns and higher unit prices
(driven by sub-scale PP production volumes). The Company estimates market size
and retail prices as follows:
Global Market Size--2001-2003*
<TABLE>
<CAPTION>
Available Market Size Unit Price (Retail, Installed)
--------------------- ------------------------------
<S> <C> <C>
2001 1,700,000 $6,700
2002 5,000,000 $4,500
2003 11,000,000 $3,250
</TABLE>
* PP and the Company plan to revisit this preliminary market assessment as
additional market research provides better information about required customer
savings, consumer willingness to pay for environmental and power quality
benefits, impact of financing/ownership alternatives on capital costs and
customer acceptance, rate of customer adoption, particularly in the developing
world, and the costs of incremental transmission and distribution vs. new
construction activity.
GO-TO-MARKET STRATEGY
The Company plans to use early 1999 to validate its market prioritization
and develop detailed, country-specific go-to-market strategies consistent with
each market's potential and the expected pace of market development. However,
in general, the Company plans to pursue a sale-for-resale approach wherever
possible. That is, the Company will seek to enter into agreements with
"resellers", entities capable of reselling fuel cell systems to residential
customers within defined territories. Potential resellers include electric
utilities, local gas distribution companies, gas and/or Power marketers, propane
distributors, rural cooperatives, gas and/or power regulatory bodies, government
agencies, reciprocating engine generator distributors, and HVAC (heating,
ventilation and air conditioning) and/or appliance dealers. These entities
typically have, on a regional basis, an installed base of customers, billing and
customer support capability, brand recognition, local market credibility, and
regulatory expertise. By working through resellers the Company expects to be
able to quickly penetrate multiple markets, avoid costly investment in sales and
support resources and accelerate the technology acceptance process. The
benefits to the reseller include margins on fuel cell system sales, service
revenues (in certain instances), and sales of ancillary products (fuel,
appliances). Due to the ease of fuel cell system installation relative to
traditional generation/T&D, resellers can also quickly enter electricity markets
beyond their existing customer footprint, thus significantly increasing both
revenue opportunity and brand recognition.
In 1999 and early 2000, the Company will have the option to offer to its
resellers Test and Evaluation units. Resellers will either purchase these units
directly or receive the units free as part of a broader commercial relationship
that may include franchise fees, take-or-pay commitments, and territorial
exclusivity. In either case the expectation is for the reseller to be a full
participant in the Test and Evaluation Program, running the Test and Evaluation
units through a prescribed regimen of tests, and providing data and feedback to
the Company and PP. Any Test and Evaluation units purchased by the Company will
be credited, dollar for dollars, against its obligation to purchase Pre-
Commercial units in 2000.
In 2000, the Company has a "take-or-pay" obligation to purchase 485 Pre-
Commercial units from PP, for a total purchase price of $10.25 million. These
units will meet the performance specifications included in the Distributor
Agreement. The Company will be offering these units to its customers to allow
them to get familiar with the performance, installation, operation, and
maintenance of the units. Customers will be expected to provide test data to the
Company and PP so that improvements can be incorporated into the commercial
systems.
<TABLE>
<CAPTION>
Reseller Approach
From Company From Reseller
<S> <C>
Full range of fuel cell products (less than)35kW Testing of prototype units
GE-PP branded products Local customer base
Application/engineering expertise Brand
Marketing/sales support Dedicated sales force
Sales/service training Gas/power commodity sales
Financing (where needed and Financing (where needed and
cost-effective) cost-effective)
Extended Warranties Relationship with regulators
Marketing materials Local billing, call/customer care
Service (where cost-effective, through center
contracts with GE and/or Service (where qualified and
third party suppliers) cost-effective)
</TABLE>
The Company is in the process of incorporating customer feedback into the
reseller contract offering. However, the Offering will likely include the
following elements: [***]
Sales Strategy and Target Customers
Target customers are residential and small commercial consumers and/or the
gas and electric its, government agencies, and independent power producers that
deliver energy sources to those consumers. During the first one to two years of
commercialization, virtually all customer demand is expected to come from the
U.S. and W. Europe, where household electricity utilization is highest. As cell
system capital costs fall, the Company will sell product to serve residential
customers worldwide.
The Company will sell to consumers through a reseller network, but will
also create brand product awareness at the consumer level through media
advertising, trade shows and other mass marketing. Resellers will augment this
effort through local advertising, mass mailings, catalog sales, and educational
seminars, promotional pricing for systems or fuel, and bundled service offerings
that provide "premium" power packages. Resellers will also work with building
contractors, financial institutions and other intermediaries to create cost-
effective mechanisms to reach consumers.
The sales strategy will highlight three core benefits of residential fuel
cell systems:
. Grid Displacement -- Electricity at lower than grid power delivered to
the home. High efficiency, low capital cost and low transmission and
distribution requirements enable fuel cell systems to produce
electricity at costs below the existing grid in regions covering tens
of millions of homes in the U.S., Western Europe and Latin America.
. Power Quality -- Highly reliable power that is also environmentally
friendly. Growth in information technology in the home for
entertainment and business
use (there are an estimated 20 million home offices in the U.S alone)
has increased the inconvenience and the economic impact of weather-
related as well as capacity-driven power outages. In the developing
world, such outages can occur daily for extended periods. Fuel cells
are an environmentally friendly, low cost, low noise, small, modular,
etc. solution to power reliability concerns.
. Electricity Access -- Electricity supply where grid does not exist or
is expensive to extend and maintain. The World Bank estimates that
40% of the world's population does not have electricity today; most of
this unelectrified population is in the developing nations. In many
low density and/or rugged terrain areas, the capital cost of building
a distributed network of fuel cell systems will over time fall
substantially below the investments required for central station
generation, transmission and distribution.
Service Strategy
The Company is committed to provide complete product support, through
its own service infrastructure and/or through contracts with third party service
providers. Potential third party service providers include those companies with
an existing national service infrastructure (e.g., Honeywell, GE Appliances), or
regional companies with strong service capabilities (e.g., HVAC companies). In
either case, the Company will seek to ensure that the service is: 1) provided at
a comparable level of quality to other GE-branded products; and 2) sufficient to
meet reasonable customer needs in the areas of timeliness, quality, and cost-
effectiveness.
The roll-out of the Company's service offering will be closely coordinated
with the introduction of the fuel cell products, such that where the product is
available, a sufficient level of installation, maintenance, and customer support
service is also available. The Company, through its service contracts, will
also provide the warranty service for the PP fuel cell systems covered by the
Distributor Agreement, according to terms to be mutually agreed between PP and
the Company.
By late 1999, the Company expects to have identified an overall service
strategy for each high-priority market. By year-end 1999, the Company expects
to have the overall service strategy translated to a comprehensive service plan
that addresses the following:
. Installation, operation, and maintenance requirements
. Service standards (e.g. response time, rework, customer support, etc.)
. Geographic coverage
. Technical qualifications
. Call center operations
. Training program
. Warrant support
At all times the Company will review its service plan with PP, and make
modifications as needed based on the pace of product development and field test
results. The Company expects the service plan to be finalized no later than
June 2000, with all requisite service contracts in place at least 3 months prior
to the expected release of commercial units in January 2001.
ORGANIZATION
GE Fuel Cell Systems (Within GEPS)
The Company will be organized and operated as a stand-alone entity, with
25% owned by Plug Power, and the remaining 75% owned by GE On-Site Power, Inc.,
a wholly owned subsidiary of General Electric Company that is controlled by GE's
Power Systems business ("GEPS"). The Company will compensate PP and GEPS for
any use of parent company resources, services, facilities, etc. The Company's
financial results will be consolidated by GEOSP, with Plug Power's ownership
accounted for as a distribution to minority interest.
The Company will have access (under a sales and services agreement) to the
Energy Services Sales organization (under Ellen Smith), and the GE Global Sales
division (under Del Williamson). These two groups work closely, together, with
Services focused on after-market sales, and Global Sales on new turbine and
generator equipment. Both groups work closely with the Company's target
Customers (e.g., electric utilities, gas companies, power and gas marketers).
The Company plans to Utilize the Services and Global Sales groups to introduce
the Company's products to the widest Possible market of potential reseller
customers. Working through the existing GEPS sales forces allows the Company to
capitalize on GEPS' credibility and existing customer relationships, and avoid
the cost and time-to-market delays in creating a new market channel. In
addition, the Company will employ a small number of full-time sales people who
will be dedicated exclusively to the Company's products. These dedicated sales
people will train the GEPS sales force, and, after the Services and Global Sales
groups have generated reseller interest, work with the Services/Global Sales
teams to structure the specific transactions. The Company sales people will
also be responsible for developing markets outside the GEPS market focus (e.g.,
propane distributors).
GE Fuel Cell Systems (Internal)
In year 1, the Company expects to have a small group of core professionals,
supplemented by consultants and contract employees as needed. As PP nears
commercial production, the Company add significantly to its dedicated sales
force and "technical support" group. The technical support personnel will work
with PP and the Company's resellers/customers to monitor alpha and testing,
establish installation and operating procedures, coordinate product testing and
development efforts with GE's Corporate Research
and Development Center, obtain all requisite regulatory approvals and
certifications, address all grid-interconnect issues, and provide technical
expertise in support of the Company's sales efforts. The overall Company
headcount plan is forecast as follows:
Resources--1999-2003
<TABLE>
1999 2000 2001 2002 2003
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Dedicated Sales 1.0 3.0 6.0 10.0 12.0
Technical Support 1.5 2.0 5.0 5.0 6.0
Marketing 2.0 3.0 4.0 5.0 5.0
General Management 1.0 1.0 1.0 1.0 1.0
Total 5.5 9.0 16.0 21.0 24.0
</TABLE>
GE - Plug Power Fuel Cell JV - Projections
<TABLE>
1999 2000 2001 2002 2003
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Unit Sales
- # of Units [***] [***] [***] [***] [***]
- Average Unit Size (kW) [***] [***] [***] [***] [***]
- # of MW [***] [***] [***] [***] [***]
- Installed Base (MW) [***] [***] [***] [***] [***]
Transfer Price (= JV COGS
per Unit) [***] [***] [***] [***] [***]
Sales Price ($ per Unit) [***] [***] [***] [***] [***]
Revenues*
- Unit Sales ($MM) [***] [***] [***] [***] [***]
- Franchise Fees ($MM) [***] [***] [***] [***] [***]
- Total ($MM) [***] [***] [***] [***] [***]
<CAPTION>
* Early year sales may be structured as a lower sales price plus a franchise fee
<S> <C> <C> <C> <C> <C>
Gross Margin ($MM)
- Unit Sales [***] [***] [***] [***] [***]
- Franchise Fees [***] [***] [***] [***] [***]
- Total [***] [***] [***] [***] [***]
- Total (% of
Revenues) [***] [***] [***] [***] [***]
Operating Expenses ($MM)
- Sales [***] [***] [***] [***] [***]
- # of Dedicated Sales
People [***] [***] [***] [***] [***]
- Salary (plus benefits)/
Person [***] [***] [***] [***] [***]
- Sales Commission (%) [***] [***] [***] [***] [***]
- Sales Commission [***] [***] [***] [***] [***]
- Travel [***] [***] [***] [***] [***]
- Technical Support [***] [***] [***] [***] [***]
- # of People [***] [***] [***] [***] [***]
- Salary (plus benefits)/
Person [***] [***] [***] [***] [***]
- Marketing (people, shows,
brochures, etc.) [***] [***] [***] [***] [***]
- R&D (electronics,
testing) [***] [***] [***] [***] [***]
- G&A (office space,
support) [***] [***] [***] [***] [***]
- Consulting/Market
Research [***] [***] [***] [***] [***]
- Non-warranty
service/unit
replacements [***] [***] [***] [***] [***]
- Total [***] [***] [***] [***] [***]
- Total (% of
Revenues) [***] [***] [***] [***] [***]
Operating Margin ($MM)
- Total [***] [***] [***] [***] [***]
- Total (% of
Revenues) [***] [***] [***] [***] [***]
</TABLE>
[***]
[Note: All numbers in this table have been omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act]
<PAGE>
EXHIBIT 4
---------
GE COMPANY POLICIES
POLICY 20.4: ETHICAL BUSINESS PRACTICES
GE expects employees to use only ethical practices in selling goods and services
and in representing the company to governmental authorities. This policy sets
forth the ethical standards of conduct and practices which must be followed with
respect to certain kinds of payments, entertainment and political contributions.
GE will not authorize, involve itself in or tolerate any business practice that
does not follow this policy.
Scope
This policy applies to employees of GE.
Controlled affiliates must adopt corresponding policies. (A controlled
affiliate is an affiliated company in which GE owns, directly or indirectly,
more than 50% of the voting shares, or in which the power of control is
possessed and exercised by or on behalf of GE.)
We must encourage affiliated but non-controlled companies to follow practices
consistent with this policy.
We must require independent third parties to represent GE in a manner that is
consistent with our commitment to integrity and the principles of this policy.
Independent third parties include: consultants, agents, sales
representatives, distributors, contractors and any other outside persons
representing GE.
Requirements
General
Never make or offer, directly or indirectly, anything of value (such as a bribe
or kickback) to a customer or government official to influence or reward an
action. A business courtesy, such as a gift, contribution or entertainment,
should never be offered under circumstances that might create the appearance
of an impropriety.
Obey the laws of the United States and other countries that relate to matters
covered by this policy.
Third parties
Require independent third parties to represent GE in accordance with this policy
and to obey the laws of the U.S. and other countries related to matters
covered by this policy.
Be careful! Exercise due diligence when selecting a third party to represent
GE,
keeping in mind that GE and its employees may, in some circumstances, be held
responsible for the actions of sales agents and other third parties. For
example, if a sales agent makes an improper payment to a government official,
the GE employee who works with that agent, as well as the Company, might be
charged with a criminal violation of the Foreign Corrupt Practices Act if the
employee a) knew about the payment (or consciously disregarded information
that the payment likely took place); and b) authorized it, either explicitly
or implicitly. When selecting a third party to represent GE, consider the
following:
Employ only reputable, qualified individuals and firms.
Understand and obey any requirements governing the use of third parties (for
example, funding agency restrictions, or customer, country or ministry
prohibitions).
Make sure that the compensation is reasonable for the services provided.
Follow the implementing procedures or component guidelines for selecting and
paying third parties.
If you spot a "red flag" (an indication of a potential policy violation)
involving a third party, make sure that it is promptly investigated and
resolved.
Seek the assistance of company legal counsel and management in exercising due
diligence and resolving any red flags.
Political contributions
Obey the laws of the U.S. and host countries in promoting the company position
to government authorities and in making political contributions.
Political contributions by the company to U.S. federal, state or local
candidates may be prohibited or regulated under the election laws. Any
contribution of company funds or other assets for political purposes in the
U.S. can only be made by GE's Vice President of Corporate Government Relations
or Vice President of State Government Relations.
. Never make or offer, directly or indirectly, a payment or anything of value
(such as a bribe or kickback) to any political party, party official, or any
candidate for political office of a country outside the U.S. to influence or
reward any governmental act or decision.
Permissible payments
You may provide customers with ordinary and reasonable entertainment and gifts
only if they are permitted by the law, the customer's own policies and
procedures, and your business component's procedures.
This policy does not prohibit lawful reimbursement for reasonable and bona
fide expenditures - for example, travel and living expenses incurred by
customers and directly related to the promotion of products or services, or
the execution of a contract.
Gifts and entertainment to officials and employees of the governments of the
U.S. and other countries are highly regulated and often prohibited. Do not
provide such gifts or entertainment unless you have determined that you are
permitted by applicable laws and regulations, and your business component's
policies and procedures to do so.
The Foreign Corrupt Practices Act does allow facilitating payments.
Facilitating payments are gratuities paid to officials or employees of non-
U.S. governments to expedite a service or routine administrative action that
these individuals ordinarily perform and to which GE is entitled under the
laws of that country. This policy allows facilitating payments in some
countries (but not all countries) and only to low-level officials or
government employees when they are customary in those countries. Seek the
advice of the National Executive or your business legal counsel before
visiting a country. Make sure that these payments are clearly and accurately
reflected in financial reports.
Employee responsibilities
Understand and keep up-to-date on the laws of the U.S. and other countries,
funding agency regulations and customer requirements related to your job and
each requirement of this policy. These requirements can be complex, and it is
not unusual to have questions related to a transaction. If you have any
questions related to matters covered by this policy, consult with business
leaders, their designees, company legal counsel, component guidelines,
implementing procedures or the GE National Executive in the country in which
you are operating.
Take the necessary steps to make sure any party acting on GE's behalf
understands and agrees to follow the principles of this policy.
Carefully watch for "red flags" which might indicate illegal activities or
violations of GE policies. These include:
a sales representative or other person representing GE or being considered to
represent GE who:
has been accused of improper business practices
has influence on the buying decision and a reputation for bribes
has a family or other relationship that could improperly influence the
customer's decision
approaches you near a customer's award decision and explains that he or she
has a "special arrangement" with an official
insists on receiving a commission payment before the customer announces the
award decision
a customer who suggests that a GE bid be made through a specific
representative or partner
any request that a commission or other payment be made in a third country or
to another name
a commission that seems unusually large in relation to the services provided.
If these or any other signs of a possible violation come to your attention, be
sure to promptly resolve your concern before proceeding with the transaction
that relates to it. Resolution should include management review and should be
well documented.
Maintain timely, accurate and complete records of all expenditures of GE funds
as spelled out in Financial Controls and Records - Policy 30.7.
Learn and follow your component's guidelines for travel and living expense
reimbursement, business entertainment and gifts. In addition, learn and
respect the policies of customers and government agencies concerning
acceptance of business entertainment and gifts.
Seek assistance from your manager, company legal counsel, or other GE resources
when you have questions about application of this policy.
Promptly report:
any concern that you may have about possible violations of this policy
any concerns others may have about a possible violation of this policy
any concerns about a possible request to violate this policy.
You may report your concerns to a GE manager, or, if you prefer, to a company
legal counsel, GE auditor, GE ombudsperson or other designated person. Your
report may be written or oral, and may be anonymous.
If you report a concern about this policy and the issue is not resolved, raise
it with one of the other contacts listed above.
Cooperate with GE investigations into concerns covered by this policy.
GE employees at all levels are prohibited from taking retribution against
anyone for reporting or supplying information about a policy concern.
Additional Responsibilities Of Leaders
Each business leader (business CEO) will set up and maintain an effective
compliance program to prevent and detect violations of this policy and
applicable laws. The business leader should tailor the compliance program to
the specific circumstances of the business, and adopt policies and procedures,
in addition to this policy, as needed. The compliance program should have the
following elements:
Set standards and procedures that are reasonably capable of reducing the
prospect of violations of this policy and applicable laws.
Assign overall responsibility for compliance to specific high-level personnel.
Screen employees and agents to prevent discretionary authority from being
delegated to persons who have demonstrated insensitivity to the
requirements of this policy and the laws it covers.
Implement educational and training programs that will enable employees to
understand the basic requirements of this policy and applicable laws.
Implement monitoring and auditing systems to detect violations of this policy
and applicable laws.
Establish and communicate a procedure for promptly reporting possible
violations and concerns that protects against fear of retribution.
Implement appropriate disciplinary mechanisms.
Take remedial action to correct weaknesses and prevent recurrence of failures.
Do not retain individuals or firms unless you are satisfied they will abide by
the principles of this policy when representing GE. Pay them reasonably for
services performed. Make sure the selection process includes a thorough
consideration of the scope of activities, credentials, background, costs and
compensation terms. Appropriate approvals should be obtained (for example,
National Executive and appropriate management review). Make sure that the
selection and payment process is consistent with the implementing procedures
or other relevant component guidelines.
Lead by example, using your own behavior as a model for all employees.
Identify those persons inside and outside GE whose activities may involve issues
covered by this policy. Carefully review and discuss the requirements of this
policy with them and every individual or firm considered to represent GE.
Make sure a program is in place to provide them with appropriate education and
legal counseling on the requirements imposed by the law and this policy.
Create a culture which promotes compliance, encourages employees to raise their
policy questions and concerns, and prohibits retribution.
Make sure employees understand that performance is never more important than
compliance.
Closely monitor and control business entertainment and gifts.
Consult with company legal counsel in executing your responsibilities under this
policy. Keep in mind that international operations may raise issues requiring
familiarity with the laws and regulations of other countries.
Promptly report employee concerns of possible violations of this policy
according to your business' reporting procedures.
. If you discover that a sales representative or other third party representing
GE engages in improper business practices for other firms, you should
consult with company legal counsel and take necessary remedial action.
Take prompt remedial action when required.
. Financial managers will make sure that accurate records are kept that show the
amount and purpose of all payments. (See Financial Controls and Records -
Policy 30.7)
Gather feedback to evaluate and continually improve compliance with this policy.
In evaluating and rewarding employees, consider their actions and judgments in
promoting and complying with this policy.
Each business CEO will:
Review financial reports covered by this policy with the responsible financial
manager.
Request, as required, financial reviews of matters covered by this policy from
finance managers or the Corporate Audit Staff.
Review, as required, other matters covered by this policy with the responsible
manager or with the Corporate Audit Staff.
Review compliance concerns or possible violations of this policy with company
legal counsel to determine the appropriate company response and disclosure
requirements.
Carefully consider the company's responsibilities under the Foreign Corrupt
Practices Act in any investment decisions.
Authorize the execution of any new international sales representative or sales
consultant services agreement that is related to a government contract and
involves commissions, contingent fees or retainer compensation greater than
$200,000 (total contract value).
Authorize (or designate a company officer to authorize) the execution of any
international service agreement or subcontract that is greater than
$2,000,000 in value and related to a government contract.
Clearly delegate the responsibility for the approval of all third party
agreements, government or commercial.
Annually, each officer or manager reporting to a business leader (business
CEO) will review compliance with this policy with his or her direct reports
and provide the results of those reviews to the business leader.
Periodically, the business leader will report on the results of those reviews
in meetings to be scheduled by the Corporate Policy Compliance Review Board
(PCRB).
Penalties for violations
Employees who violate the spirit or letter of this policy are subject to
disciplinary action up to and including discharge. The following are examples
of conduct which may result in discipline.
Actions which violate this policy
Requesting others to violate this policy
Failure to promptly report a known or suspected policy violation
Failure to cooperate in GE investigations of possible violations
Retribution against another employee for reporting a policy concern
Failure to demonstrate the leadership and diligence needed to ensure compliance
with GE policies and applicable law.
Violating this policy can also mean breaking the law and subjecting yourself
or the company to criminal penalties (fines or jail sentences), or civil
sanctions (damage awards or fines). The company could also lose its
government contracting and defense export privileges.
GE will terminate contracts with consultants, sales representatives,
distributors, independent contractors and any other third parties who are
unwilling or unable to represent GE in a manner consistent with this policy.
Related policies:
Following International Trade Controls - Policy 20.9
Working with Government Agencies - Policy 20.10
Customer Satisfaction - Policy 20.11
Avoiding Conflicts of Interest - Policy 30.5
Financial Controls and Records - Policy 30.7
Supplier Relationships - Policy 30.13
Resources:
More information on matters covered by this policy is available through the
Corporate Audit Staff, Corporate International Law and Policy, and company legal
counsel
<PAGE>
EXHIBIT 5
---------
FORM OF CONTRIBUTION AGREEMENT
(See Exhibit 10.2)
<PAGE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
EXHIBIT 6
---------
PROMISSORY NOTE
---------------
$18,250,000.00
Schenectady, New York
February 2, 1999
1. Payment of Principal and Interest. FOR VALUE RECEIVED, GE FUEL CELL
---------------------------------
SYSTEMS, L.L.C., a Delaware limited liability company (the "Maker"), hereby
promises to pay to the order of GENERAL ELECTRIC COMPANY, a New York
corporation, and any subsequent holder of this Note ("Holder" or "Holders") in
the manner hereinafter provided, the principal amount of Eighteen Million Two
Hundred Fifty Thousand Dollars ($18,250,000.00) or such lesser amount as shall
equal the aggregate unpaid principal amount of loans made by Holder to Maker
under Section 5.5 of the Amended and Restated Limited Liability Company
Agreement dated as of February 3, 1999, by and between GE On-Site Power, Inc.,
and Plug Power, L.L.C. (the "LLC Agreement"), in the form of cash disbursements
(individually a "Disbursement" and collectively "Disbursements"), and to pay
interest on the unpaid principal amount of each such Disbursement, for the
period commencing on the date of such Disbursement until such Disbursement shall
be paid in full, as follows:
(a) For each Disbursement, interest will accrue from the date of such
Disbursement on the unpaid balance of such Disbursement outstanding
from time to time at a rate equal to the greater of the [***] or [***]
(whichever is applicable shall be the "Contract Rate"). Holder shall
notify Maker monthly of the Contract rate that will apply for the
month then ended;
(b) On each January 31, Maker will repay Holder an amount equal to
the lesser of (i) the unpaid principal of all Disbursements and
interest thereon, or (ii) 50% of Maker's cash available for
distribution for the prior fiscal year in accordance with applicable
law and provided that, following such distribution, Maker has positive
cash flow from operations and the ability to continue its business
without incurring additional debt; however, any principal and interest
remaining unpaid after such January 31 payment date shall not be
forgiven, and such unpaid interest shall also bear interest at the
applicable Contract Rate from the January 1 preceding such payment
date and thereafter; and
(c) On December 31, 2003, Maker will repay the entire unpaid
principal amount and any interest accrued but remaining unpaid and all
other sums due under this Note.
Interest shall be calculated on the basis of a 360-day year containing twelve
30-day months. All such payments on account of the indebtedness evidenced by
this Note shall be first applied to all payments other than principal and
interest due under this Note, second to interest accrued on the unpaid principal
amount, and the remainder toward reduction of the unpaid principal amount.
The date, amount, and interest rate of each Disbursement made by Holder to
Maker, and each payment made on account of the principal thereof, shall be
recorded by Holder on its books and, prior to any transfer of this Note,
endorsed by Holder on the schedule attached hereto or any continuation thereof.
Holder shall provide written notice to Maker upon each such disbursement. This
Note is the Promissory Note referred to in Section 5.5 of the LLC Agreement and
evidences the loans made by Holder thereunder.
<PAGE>
2. Payment Information. All payments required to be made hereunder shall
-------------------
be made during regular business hours to an account designated by Holder from
time to time, with sufficient information to identify the source and application
of such payment to this Note. All payments shall be made in currency of United
States of America without presentment or surrender of this Note. Payments to
Holder shall be made by transferring immediately available federal funds by bank
wire or interbank transfer for the account of Holder provided, however, that any
payment of principal or interest received after 2:00 p.m. New York time shall be
deemed to have been received by Holder on the next business day and shall bear
interest accordingly. If and so long as Holder directs Maker to make payments to
a servicing agent, then payments may be made by check. Payments made by check
will not be deemed made until such check has cleared and available funds for
such check are received by Holder or the servicing agent.
3. Security For Note. The payment of this Note and all other sums due
-----------------
Holder is secured by a Security Agreement of even date herewith between Maker
and Holder, as secured party ("Security Agreement"), covering certain tangible
and intangible personal property of Maker, and all proceeds thereof, accessions
thereto and replacements thereof, wherever situated ("Property"), and described
in the Security Agreement. Except as otherwise defined herein, all of the
defined terms contained in the Security Agreement are hereby incorporated herein
by express reference.
4. Interest Payable Upon Default. If there occurs an Event of Default
-----------------------------
under this Note or the Security Agreement, then the unpaid principal amount of
this Note, and all accrued and unpaid interest thereon shall bear interest at
the lesser of either the Contract Rate [***] per annum compounded monthly or
[***] ("Default Rate") from the date of expiration of any applicable cure or
grace period until such time, if any, as the Event of Default is cured and this
Note and the Security Agreement are reinstated as permitted by applicable law,
or otherwise until such time as the unpaid principal amount of this Note and all
other indebtedness evidenced by this Note are fully repaid, whichever is
earlier. The additional payments called for under this paragraph 4 shall be in
addition to, and shall in no way limit, any other rights and remedies provided
for in this Note or the Security Agreement, as well as all other remedies
provided by law.
5. Events of Default. An "Event of Default" shall exist under this Note
-----------------
(a) in the event Maker shall fail to make the final payment when such payment is
due; or (b) if Maker shall be dissolved.
6. Payment of Taxes and Expenses.
-----------------------------
(a) Maker further promises to pay to Holder, immediately upon written
notice from Holder: (i) all recordation, transfer, stamp, documentary or other
fees or taxes levied on Holder (exclusive of Holder's income taxes) by reason of
the making or recording of this Note, the Security Agreement, and any UCC-1
financing statement, and (ii) all intangible property taxes levied upon any
Holder of this Note or secured party under the Security Agreement.
(b) Maker further promises to pay to Holder, immediately upon written
notice from Holder, all actual costs, expenses, disbursements, escrow fees,
title charges and reasonable legal fees and expenses actually incurred by Holder
and its counsel in (i) the collection, attempted collection, or negotiation and
documentation of any settlement or workout of the principal amount of this Note,
the interest thereon or any installment or other payment due hereunder, and (ii)
any suit or proceeding whatsoever at all trial and appellate levels in regard to
this Note or to protect, sustain or enforce the lien of any instrument securing
this Note, including, without limitation, in any bankruptcy proceeding or
judicial or nonjudicial foreclosure proceeding. It is the intent of the parties
that Maker pay all expenses and reasonable attorneys' and paralegals' fees
incurred by Holder as a result of Holder's entering into the loan transaction
evidenced by this Note.
-2-
<PAGE>
7. Maker's Covenants. Maker agrees that (a) this instrument and the
-----------------
rights and obligations of all parties hereunder shall be governed by and
construed under the laws of the State of New York; (b) the obligation evidenced
by this Note is an exempted transaction under the Truth-in-Lending Act, 15 U.S.C
(S)1601, et seq. (1982); (c) said obligation constitutes a business loan for the
-- ----
purpose of the application of any laws that distinguish between consumer loans
and business loans and that have as their purpose the protection of consumers in
the State of New York; (d) at the option of the Holder, the United States
District Court for the Northern District of New York and any court of competent
jurisdiction of the State of New York shall have jurisdiction in any action,
suit or other proceeding arising out of or relating to any act taken or omitted
hereunder or the enforcement of this Note or the Security Agreement, and Maker
shall not assert in any such action, suit or other proceeding that it is not
personally subject to the jurisdiction of the courts in (d) above, that the
action, suit or other proceeding is brought in an inconvenient forum or that the
venue of the action, suit or other proceeding is improper; and (e) it hereby
waives any objections to venue.
8. Severability. The parties hereto intend and believe that each
------------
provision of this Note comports with all applicable local, state and federal
laws and judicial decisions. However, if any provision or any portion of any
provision contained in this Note is held by a court of law to be invalid,
illegal, unlawful, void or unenforceable as written in any respect, then it is
the intent of all parties hereto that such portion or provision shall be given
force to the fullest possible extent that it is legal, valid and enforceable,
that the remainder of the Note shall be construed as if such illegal, invalid,
unlawful, void or unenforceable portion or provision was not contained therein,
and that the rights, obligations and interests of Maker and Holder under the
remainder of this Note shall continue in full force and effect.
9. Usury Laws. It is the intention of Maker and Holder to conform
----------
strictly to the usury laws now or hereafter in force in the State of New York,
and any interest payable under this Note or the Security Agreement shall be
subject to reduction to an amount not to exceed the maximum non-usurious amount
for commercial loans allowed under the usury laws of the State of New York as
now or hereafter construed by the courts having jurisdiction over such matters.
In the event such interest (whether designated as interest, service charges,
points, or otherwise) does exceed the maximum legal rate, it shall be (a)
canceled automatically to the extent that such interest exceeds the maximum
legal rate; (b) if already paid, at the option of the Holder, either be rebated
to Maker or credited on the principal amount of the Note or (c) if the Note has
been prepaid in full, then such excess shall be rebated to Maker.
10. Acceleration. Upon an Event of Default, Holder shall have the right,
------------
without demand or notice, to declare the entire principal amount of this Note
then outstanding, all accrued and unpaid interest thereon and all other sums
required under this Note or the Security Agreement to be immediately due and
payable and, notwithstanding the stated maturity in this Note, all such sums
declared due and payable shall thereupon become immediately due and payable.
During the existence of such Event of Default, Holder may apply payments
received on any amounts due under this Note or the Security Agreement as Holder
may determine in its sole discretion.
11. Waivers by Maker. As to this Note, the Security Agreement, and any
----------------
other instruments securing the indebtedness, Maker and all guarantors, sureties
and endorsers, severally waive all applicable exemption rights, whether under
any state constitution, homestead laws or otherwise, and also severally waive
diligence, valuation and appraisement, presentment for payment, protest and
demand, notice of protest, demand and dishonor and diligence in collection and
nonpayment of this Note and all other notices in connection with the delivery,
acceptance, performance, default, or enforcement of the payment of this Note.
To the extent permitted by law, Maker further waives all benefit that might
accrue to Maker by virtue of any present or future laws exempting the Property,
or any other property, real or personal, or the proceeds arising from any sale
of any such property, from attachment, levy, or sale under execution, or
providing for any stay of execution to be issued on any judgment recovered on
this Note or in any action to foreclose the Security Agreement, injunction
against sale pursuant to power of sale, exemption from civil process or
extension of time for payment. Maker agrees that any real estate or any
personalty that may be
-3-
<PAGE>
levied upon pursuant to a judgment obtained by virtue of this Note, or any writ
of execution issued thereon, may be sold in whole or in part in any order
desired by Holder.
12. Maker Not Released. No delay or omission of Holder to exercise any of
------------------
its rights and remedies under this Note or the Security Agreement at any time
following the happening of an Event of Default shall constitute a waiver of the
right of Holder to exercise such rights and remedies at a later time by reason
of such Event of Default or by reason of any subsequently occurring Event of
Default. This Note, or any payment hereunder, may be extended from time to time
by agreement in writing between Maker and Holder without in any other way
affecting the liability and obligations of Maker and endorsers, if any.
13. Nonrecourse. Except as otherwise set forth in this paragraph, the
-----------
liability of Maker under this Note and the Security Agreement shall be limited
to and satisfied from the Property and the proceeds thereof, the rents and all
other income arising therefrom, the other assets of Maker arising out of the
Property which are given as collateral for the Loan, and any other collateral
given in writing to Holder as security for repayment of this Note (all of the
foregoing are collectively referred to as the "Loan Collateral"); provided,
however, that nothing contained in this paragraph shall (a) preclude Holder from
foreclosing the lien of the Security Agreement or from enforcing any of its
rights or remedies in law or in equity against Maker except as stated in this
paragraph, (b) constitute a waiver of any obligation evidenced by this Note or
secured by the Security Agreement, (c) limit the right of Holder to name Maker
as a party defendant in any action brought under this Note or the Security
Agreement, (d) prohibit Holder from pursuing all of its rights and remedies
against any guarantor or surety, or (e) limit the personal liability of Maker
for misappropriation or misapplication of funds, fraud, waste, willful
misrepresentation or willful damage to the Property.
14. Successors and Assigns. The provisions of this Note shall be binding
----------------------
upon Maker and its legal representatives, successors and assigns and shall inure
to the benefit of any Holder and its successors and assigns. Holder may assign
this Note to any of its wholly-owned subsidiaries.
15. Remedies Cumulative. The remedies of Holder as provided in this Note,
-------------------
or in the Security Agreement, and the warranties contained herein shall be
cumulative and concurrent, may be pursued singly, successively or together at
the sole discretion of Holder, may be exercised as often as occasion for their
exercise shall occur and in no event shall the failure to exercise any such
right or remedy be construed as a waiver or release of such right or remedy. No
remedy under this Note, conferred upon or reserved to Holder is intended to be
exclusive of any other remedy provided in this Note or the Security Agreement or
provided by law, but each shall be cumulative and shall be in addition to every
other remedy given under the Security Agreement or hereunder or now or hereafter
existing at law or in equity or by statute.
16. Notices. All notices, written confirmation of wire transfers and all
-------
other communications with respect to this Note shall be directed as follows: if
to Holder, to General Electric Company, 1 River Road, Schenectady, New York
12345, Attention: Finance Manager, Energy Services, with a copy to GE Power
Systems, 1 River Road, Schenectady, New York 12345, Attention: General Counsel;
if to Maker, GE Fuel Cell Systems, L.L.C., 1 River Road, Schenectady, New York
12345, Attention: President; or at such other place as Holder or Maker may from
time to time designate in writing. All notices shall be in writing and shall be
(a) hand-delivered, (b) sent by United States express mail or by private
overnight courier, or (c) served by certified mail postage prepaid, return
receipt requested, to the appropriate address set forth above. Notices served as
provided in (a) and (b) shall be deemed to be effective upon delivery. Any
notice served by certified mail shall be deposited in the United States mail
with postage thereon fully prepaid and shall be deemed effective on the day of
actual delivery as shown by the addressee's return receipt or the expiration of
three (3) business days after the date of mailing, whichever is earlier in time.
-4-
<PAGE>
17. No Oral Modification. This Note may not be modified or discharged
--------------------
orally, but only by an agreement in writing signed by the party against whom
enforcement of any waiver, modification or discharge is sought.
18. Time. Time is of the essence with regard to the performance of the
----
obligations of Maker in this Note and each and every term, covenant and
condition herein by or applicable to Maker.
19. Captions. The captions and headings of the paragraphs of this Note
--------
are for convenience only and are not to be used to interpret, define or limit
the provisions hereof.
20. Replacement Note. Upon receipt of evidence reasonably satisfactory to
----------------
Maker of the loss, theft, destruction or mutilation of this Note, and in the
case of any such loss, theft or destruction, upon delivery of an indemnity
agreement reasonably satisfactory to Maker or, in the case of any such
mutilation, upon surrender and cancellation of this Note, Maker will execute and
deliver to Holder in lieu thereof, a replacement note dated as of the date of
this Note, identical in form and substance to this Note and upon such execution
and delivery all references in the Security Agreement to this Note shall be
deemed to refer to such replacement note.
IN WITNESS WHEREOF, Maker has caused this Revolving Promissory Note to be
duly executed on the date first written above.
MAKER:
GE FUEL CELL SYSTEMS, L.L.C.
By: /s/ Barry Glickman
-----------------------------------
Barry Glickman, President
-5-
<PAGE>
SCHEDULE OF DISBURSEMENTS
This Note evidences loan disbursements made to Maker under the LLC
Agreement on the dates, in the principal amounts, and bearing interest at the
rates set forth below, subject to the payments of principal set forth below:
Principal Unpaid
Date of Amount of Interest Amount Principal Notation
Loan Loan Rate Paid Amount Made By
---- ---- ---- ---- ------ -------
-6-
<PAGE>
SECURITY AGREEMENT
------------------
In consideration of certain financial accommodations given by General
Electric Company, a New York corporation (the "Secured Party"), GE Fuel Cell
Systems, L.L.C., a Delaware limited liability company (the "Debtor"), as
collateral security for the payment of that certain Promissory Note of Debtor to
Secured Party of even date herewith, in the aggregate principal amount of
[***], a copy of which is attached hereto as Exhibit "1" (the "Indebtedness"),
Debtor, pursuant to the provisions of the Uniform Commercial Code of the State
of New York (the "UCC") hereby grants Secured Party a security interest in and
to all assets of Debtor whether now owned or hereafter acquired, including, but
not limited to, all Accounts, Chattel Paper, Documents, Equipment, Fixtures,
General Intangibles, Goods, Instruments, and Inventory (all as defined in the
UCC), and all other tangible and intangible personal property of Debtor, and all
proceeds thereof, accessions thereto and replacements thereof (the
"Collateral").
Debtor hereby warrants and covenants that:
1. The security interest granted to Secured Party by Debtor shall apply to
the Collateral whether or not title thereto or any part thereof shall have
passed, or shall be deemed to have passed, to Debtor; Debtor is, or to the
extent that this Agreement states that the Collateral is to be acquired after
the date hereof, will be the owner of the Collateral free from any adverse lien,
security interest or encumbrance; and Debtor will defend the Collateral against
all claims and demands of all other persons at any time claiming the same or any
interest therein.
2. The Collateral will be kept at the addresses designated at the
conclusion of this Agreement.
3. At the request of Secured Party, Debtor will join with Secured Party in
executing one or more financing statements, amendments, continuations and
termination statements pursuant to the Uniform Commercial Code of the State of
New York, in which Debtor is conducting business, in form satisfactory to
Secured Party.
4. Debtor will not sell or offer to sell, or otherwise transfer the
Collateral or any interest therein without having given Secured Party actual
notice of any such sale and having received the written consent of Secured
Party; provided, however, that if the Collateral is Debtor's merchandise
inventory, Debtor shall be entitled to sell that portion of the Collateral which
constitutes merchandise and inventory in the ordinary and usual course of
business.
5. Debtor will, at all times, maintain in full force and effect insurance
with respect to the Collateral against risks encompassed within the standard
policy of fire insurance with extended coverage endorsement, theft and other
risks as Secured Party may require, and written by such company or companies as
may be satisfactory to Secured Party, such insurance to be payable to Secured
Party and Debtor as their interests may appear.
6. Debtor will keep the Collateral free from any adverse lien, other than
the lien specifically authorized above, security interest or encumbrance and in
good order and repair and will not waste or destroy the Collateral or any part
thereof (except that if the Collateral is merchandise inventory of Debtor,
Debtor shall be entitled to sell that portion of the Collateral which
constitutes merchandise and inventory in the ordinary and usual course of
business). Secured Party may examine and inspect the Collateral at any
reasonable time wherever located, provided, however, that no such inspection
--------- -------
shall interfere with or inconvenience Debtor in the operations of its business.
7. Debtor will pay promptly when due all taxes and assessments upon the
Collateral or for its use and operation. At its option, upon reasonable notice
by Secured Party, and upon the failure of Debtor to comply with the terms set
forth herein, Secured Party may discharge taxes, liens, security interests, or
other encumbrances at any time levied or placed on the Collateral, may pay for
insurance on the Collateral and may pay for the
<PAGE>
maintenance and preservation of the Collateral. Debtor agrees to reimburse
Secured Party on demand for any payment made or any expense incurred by Secured
Party pursuant to the foregoing authorization, together with interest thereon at
the highest rate permitted by law.
8. Until default, Debtor may have possession of the Collateral and use it
in any lawful manner not inconsistent with this Agreement.
9. Debtor shall be in default under this Agreement upon the happening of
any of the following events or conditions (each an "Event of Default"):
(a) Failure of Debtor to make final payment of the Promissory Note
when such payment is due.
(b) Dissolution of Debtor.
Upon an Event of Default and at any time thereafter, Secured Party may
declare the indebtedness secured hereby immediately due and payable and shall
have the remedies of a secured party under the Uniform Commercial Code of the
State of New York.
10. Should a lawsuit be brought to enforce the terms hereof or for any
dispute arising out of this transaction, then the issues in any such action
shall be determined pursuant to the laws of the State of New York, without
regard to conflict of laws provisions thereof, and the parties hereto hereby
consent to jurisdiction and venue in the courts of Schenectady County, New York,
or the United States District Court for the Northern District of New York, at
the option of Secured Party. The substantially prevailing party in such a
lawsuit shall be entitled to recover from the substantially non-prevailing party
its reasonable expenses, court costs, including taxed and untaxed costs, and
reasonable attorneys' fees, whether suit be brought or not (jointly referred as
to "Expenses"). As used herein, Expenses include expenses incurred in any
appellate or bankruptcy proceeding. All such Expenses shall bear interest at the
highest rate allowable under the laws of the State of New York from the date the
substantially prevailing party pays such Expenses until the date the
substantially non-prevailing party repays such Expenses.
11. No waiver by Secured Party of any Event of Default shall operate as a
waiver of any other Event of Default or of the same Event of Default on a future
occasion.
12. All rights of Secured Party hereunder shall inure to the benefit of its
successors or assigns; and all obligations of Debtor shall bind Debtor's
successors and assigns. Secured Party may assign this Security Agreement to one
of its wholly-owned affiliates.
13. Secured Party acknowledges that the Collateral granted by Debtor shall
not include any patents, trademarks, trade names, inventions, copyrights, know-
how, trade secrets, licensed rights, or other intellectual property rights of
any Member of Debtor, including any intellectual property now in existence or
hereafter acquired or developed by any such Member.
-2-
<PAGE>
IN WITNESS WHEREOF, Debtor and Secured Party have caused this instrument to
be executed in duplicate by their authorized representatives this ____ day of
February, 1999.
Debtor: Secured Party:
GE FUEL CELL SYSTEMS, L.L.C. GENERAL ELECTRIC COMPANY
By:_____________________________ By:____________________________________
Barry Glickman, President Ricardo Artigas
President and CEO, GE Energy Service
Address: 1 River Road
Schenectady, New York 12345
-3-
<PAGE>
EXHIBIT 7
---------
FORM OF GE TRADEMARK AND TRADE NAME AGREEMENT
(See Exhibit 10.3)
<PAGE>
EXHIBIT 8
---------
FORM OF PLUG POWER TRADEMARK AGREEMENT
(See Exhibit 10.4)
<PAGE>
EXHIBIT 9
---------
FORM OF DISTRIBUTOR AGREEMENT
(See Exhibit 10.5)
<PAGE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
EXHIBIT 10.5
DISTRIBUTOR AGREEMENT
THIS DISTRIBUTOR AGREEMENT is made and entered into as of this 2nd day of
February, 1999 (herein referred to as the "Effective Date"), between GE FUEL
CELL SYSTEMS, L.L.C., a Delaware limited liability company located at 1 River
Road, Schenectady, New York 12345 (hereinafter referred to as "DISTRIBUTOR"),
and PLUG POWER, L.L.C., a Delaware limited liability company located at 968
Albany-Shaker Road, Latham, New York 12110 (hereinafter referred to as
"SUPPLIER").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, DISTRIBUTOR and SUPPLIER intend to enter into this Agreement in
order to set forth, in writing, DISTRIBUTOR's obligation to market and sell
Products (defined below) and Pre-Commercial Units (defined below) and provide
Services (defined below) in the Territory (defined below); and
WHEREAS, the mission of DISTRIBUTOR and SUPPLIER through the term of this
Agreement is to bring to customers the highest quality line of Products and Pre-
Commercial Units and provide world-class Services for the purpose of increasing
SUPPLIER's Product and Pre-Commercial Unit sales;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the mutual benefits to be derived
herefrom, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I - DEFINITIONS
1.1 Affiliate. The term "Affiliate" when used herein shall mean, with
---------
respect to any Person, any Person directly or indirectly controlling, controlled
by, or under common control with such other Person, except that an Affiliate of
SUPPLIER shall only include any Person directly or indirectly controlled by
SUPPLIER. As used herein, control shall mean the ownership, either directly or
by attribution, of more than 50% of the combined voting rights attributable to
the equity interests of a Person or the ability, either direct or indirect, to
control the composition of the majority of the Board of Directors or comparable
management body of a Person.
1.2 Agreement. The term "Agreement" when used herein shall mean this
---------
document and any annex, exhibit, attachment, schedule, addendum, or modification
hereto, unless the context otherwise indicates.
1.3 Commencement Date. The term "Commencement Date" when used herein shall
-----------------
have the meaning ascribed in Section 4.1 hereof.
1.4 Customer. The term "Customer(s)" when used herein shall mean any
--------
purchaser or potential purchaser of the Products, Pre-Commercial Units, Test &
Evaluation Units, or Services from DISTRIBUTOR, directly or indirectly through
third parties.
<PAGE>
1.5 GEPS. The term "GEPS" when used herein shall mean the GE Power Systems
----
business of General Electric Company.
1.6 GEPS Competitor. The term "GEPS Competitor" when used herein shall
---------------
mean any of the following Persons, provided that DISTRIBUTOR may revise this
list upon written notice to SUPPLIER to include additional Persons involved
directly, or indirectly through an affiliate, in the manufacture, assembly, or
provision of O&M services for, gas or steam turbines, regardless of origin or
design: AAR Engine Group - USA; ABB - Switzerland; Advanced Materials
Technologies, Inc. -USA; Aero & Industrial Technology - UK; Aetc Ltd./ - UK;
Alfa Laval - UK; AlliedSignal - US; Bailey Automation PLC - UK; Baird
Analtical -USA; Baker/MO Services Inc. - USA; Bales Scientific Inc. - USA;
Bently Nevada -USA; Bosman Powersource B.V. - Netherlands; Boyce Engineering
Int'l. Ltd. - UK; Boyce Engineering International - USA; Brush Electrical
Machines Ltd. - UK; Chromalloy Gas Turbine - USA; Concepts ETI, Inc. - USA;
Conmec, Inc. - USA; Cooper Energy Services - USA; Cooper Rolls - USA; Demag
Delaval Turbomachinery Corp. - USA; Dresser Rand Turbo Products Division - USA;
Ebara Corporation -Japan; Elbar BV- Netherlands; European Gas Turbines Ltd. -
UK; Fern Engineering, Inc. - USA; Fiat Avio S.P.A. - Italy; Gas-Path Technology,
Inc. - USA; Hickham Industries, Inc. - USA; Hitachi - Japan; Honeywell Solid
State Electric Center -USA; HSDE -UK; IHI-Japan; John Brown / Kvearner
Engineering - UK; Kawasaki -Japan; Liburdi Engineering Ltd. - Canada; Man
Gutehoffnungshutte AG - Germany; Mannesmann Demag Veidichter - Germany; McGuffy
Systems, Inc. - USA; Mitsubishi Heavy Industries -Japan; Moog Controls - USA;
Natole Turbine Enterprises, Inc. -USA; Ormat Industries Ltd. - Israel;
Petrotech, Inc. - USA; Polytec P.I. Inc. -USA; Powmat Ltd - USA; Pratt &
Whitney -USA; Precision Castparts Corp. - USA; Preco Turbine Services Inc. -
USA; Rolls-Royce Industrial & Marine - UK; Senior Thermal Engineering - UK;
Sermatech International Inc. - USA; Siemens-Westinghouse Power Corp. - USA;
Solar Turbines Incorporated - USA; SPE Mashproekt - Ukraine; Stork RMO BV -
Netherlands; Sulzer Turbo - Germany; Thomassen International B.V. -Netherlands;
Toshiba - Japan; Triconex Systems, Inc. - USA; Turbine Controls Ltd. - UK;
Turbine Technology Services Corp. - USA; Wilson & Daleo Inc. -Canada; Wood Group
Gas Turbines Ltd.- UK.
1.7 PEM Fuel Cell-Powered Generator Set. The term "PEM Fuel Cell-Powered
-----------------------------------
Generator Set" when used herein shall mean a proton exchange membrane fuel cell
stack packaged with a fuel processor (to convert fuel at standard available
pressure and quality to fuel usable by the fuel cell stack), with a maximum
continuous output no greater than 35 kW, and all of the ancillary components,
systems, electronics, batteries, controls, protective relaying (e.g., over/under
current, transfer switch), and enclosure(s) required to be ready for indoor or
outdoor installation and operation for stand-alone or grid-interconnected
stationary power applications.
1.8 Person. The term "Person" when used herein shall mean an individual, a
------
corporation, a partnership, a limited liability company, an association, a trust
or other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.
1.9 Pre-Commercial Unit. The term "Pre-Commercial Unit" when used herein
-------------------
shall mean a 7kW output PEM Fuel Cell-Powered Generator Set manufactured by
SUPPLIER and meeting the specifications outlined in Schedule B attached hereto.
----------
-2-
<PAGE>
1.10 Product Quality and Safety Assurance Program. The term "Product
--------------------------------------------
Quality and Safety Assurance Program" when used herein shall have the meaning
ascribed in Section 6.8 of this Agreement.
1.11 Products. The term "Products" when used herein shall mean the PEM Fuel
--------
Cell-Powered Generator Sets and other items manufactured by or on behalf of
SUPPLIER described on Schedule A-1, attached hereto, and such other items which
------------
may, from time to time, be included on Schedule A-1 pursuant to the terms of
------------
this Agreement or by the mutual written consent of SUPPLIER and DISTRIBUTOR.
1.12 Proprietary Information. The term "Proprietary Information" when used
-----------------------
herein shall have the meaning ascribed in Section 7.1 hereof.
1.13 Services. The term "Services" when used herein shall mean those
--------
services listed on Schedule A-2 of this Agreement, attached hereto.
------------
1.14 Term. The term "Term" when used herein shall mean the term of this
----
Agreement as defined pursuant to Section 4.1, including all extensions and
renewals thereof.
1.15 Territory. The term "Territory" when used herein shall mean every
---------
country, province, territory or other principality in the world, except the
States of Michigan, Indiana, Ohio, and Illinois while Edison Development
Corporation has exclusive rights to market and sell products similar to Products
and provide services similar to Services therein. In the event that Edison
Development Corporation ("EDC") shall lose all of its rights to market and sell
similar products and provide similar services in the States of Michigan,
Indiana, Ohio and Illinois in the United States of America (the "EDC
Territory"), this definition of "Territory" shall be expanded to include the EDC
Territory. In the event that EDC shall lose its exclusive rights to market and
sell similar products and provide similar services in the EDC Territory,
DISTRIBUTOR will have the rights to market and sell Products and provide
Services in the EDC Territory on a non-exclusive basis.
1.16 Test & Evaluation Unit. The term "Test & Evaluation Unit" when used
----------------------
herein shall mean a pre-commercial version of the Product with performance
(e.g., efficiency, emissions, size, noise, reliability) below that of a Pre-
Commercial Unit, which is intended to demonstrate proof of concept and provide
the manufacturer with field test data.
ARTICLE II - APPOINTMENT AND SCOPE
2.1 Appointment. Subject to the terms and conditions and for the Term of
-----------
this Agreement (as defined in Article IV hereof) SUPPLIER hereby appoints
DISTRIBUTOR, and DISTRIBUTOR accepts such appointment, as SUPPLIER's distributor
in the Territory to exclusively purchase, except as set forth in Section 2.2(a),
Products, Pre-Commercial Units, and Test & Evaluation Units, and market and sell
Products, Pre-Commercial Units, and Test & Evaluation Units to Customers for
their own use or resale, and to provide Services to Customers.
2.2 Non-Compete. During the term of this Agreement and except as
-----------
otherwise provided herein,
-3-
<PAGE>
(a) SUPPLIER and its Affiliates shall not, directly or indirectly,
market or sell PEM Fuel Cell-Powered Generator Sets, components, replacement
parts, upgrades, accessories, or improvements that compete with Products, Pre-
Commercial Units, or Test & Evaluation Units, market and sell the output of PEM
Fuel Cell-Powered Generator Sets that compete with the Products, Pre-Commercial
Units, or Test & Evaluation Units, or provide Services to Customers in the
Territory, so long as, and to the extent that, DISTRIBUTOR is SUPPLIER's
exclusive distributor in the Territory pursuant to this Agreement (except for
sales of Test & Evaluation Units and Pre-Commercial Units to federal, state,
municipal and other governmental entities, the Gas Research Institute, Electric
Power Research Institute, and such other industry groups mutually agreed to by
SUPPLIER and DISTRIBUTOR, to the extent such entities and groups are purchasing
the units for their research and development, as opposed to purchasing the units
for resale);
(b) DISTRIBUTOR will utilize SUPPLIER as its sole supplier of PEM
Fuel Cell-Powered Generator Sets, components, replacement parts, upgrades,
accessories, and improvements therefor.
2.3 Third Parties. DISTRIBUTOR may appoint or contract with third parties
-------------
(e.g., agents, distributors, sub-distributors) in connection with the marketing
and sale of the Products, Pre-Commercial Units, and Test & Evaluation Units and
the provision of Services, so long as any compensation to such third parties
shall be the sole responsibility of DISTRIBUTOR. DISTRIBUTOR will use reasonable
efforts to consult with SUPPLIER regarding any such appointments or contracts
prior to entering into such appointments or contracts.
2.4 Independent Contractor Status. DISTRIBUTOR is an independent purchaser
-----------------------------
and seller of the Products, Pre-Commercial Units, and Test & Evaluation Units.
Nothing contained in this Agreement shall be construed to constitute DISTRIBUTOR
as a partner, employee, agent or joint venturer of SUPPLIER, nor shall
DISTRIBUTOR and SUPPLIER have any authority to bind the other in any respect, it
being intended that each shall remain an independent contractor responsible for
its own actions. Each party shall be responsible for all of its own expenses and
employees, except as provided otherwise in this Agreement.
2.5 Provision of Services. To the extent SUPPLIER is engaged in providing
---------------------
any Services, SUPPLIER hereby agrees to make available such Services requested
by DISTRIBUTOR, in accordance with the provisions set forth in this Agreement,
including Section 3.3 hereof. SUPPLIER hereby agrees that DISTRIBUTOR shall be
the sole provider of Services to DISTRIBUTOR's Customers with respect to the
Products and that DISTRIBUTOR may utilize any service provider to provide such
Services.
2.6 Resale of Products by DISTRIBUTOR or Customer. Other than as expressly
---------------------------------------------
set forth in this Agreement, the DISTRIBUTOR and its Customers shall not have
any restrictions, in any manner, with respect to the resale of any Product, Pre-
Commercial Unit, or Test & Evaluation Unit acquired pursuant to this Agreement,
including restrictions as to the price at which they elect to resell any such
Products, Pre-Commercial Units, or Test & Evaluation Units.
-4-
<PAGE>
ARTICLE III - TERMS AND CONDITIONS OF SALE OF THE PRODUCTS
3.1 Product Purchase Orders; Terms and Conditions. The terms and
---------------------------------------------
conditions for all orders for the Products and Pre-Commercial Units shall be
subject to all of the provisions set forth in this Article III and in Schedules
---------
B, C, and D, attached hereto.
- ------------
3.2 Service Orders; Terms and Conditions. The terms and conditions for all
------------------------------------
orders for the provision of Services shall be subject to all the provisions set
forth in this Article III, in Schedule B, and as otherwise negotiated between
----------
the parties.
3.3 Prices; Products and Services.
-----------------------------
(a) The prices charged to DISTRIBUTOR for all Products purchased
hereunder shall be the lower of (i) those prices set forth on Schedule C,
----------
attached hereto, or (ii) the lowest prices charged by SUPPLIER to any other
purchaser for the same such Product in similar quantities during the four months
preceding an order. To the extent that SUPPLIER's direct cost per unit for the
Products exceeds that set forth on Schedule C, SUPPLIER and DISTRIBUTOR shall
----------
agree to an increase in the price to DISTRIBUTOR and a decrease to DISTRIBUTOR's
Sales Commitments. If SUPPLIER and DISTRIBUTOR cannot reach such agreements,
then this Agreement shall terminate. The prices charged to DISTRIBUTOR for all
Pre-Commercial Units purchased hereunder shall be those prices set forth on
Schedule C, and such prices are not subject to adjustment even if SUPPLIER sells
- ----------
Pre-Commercial Units to another purchaser at a lower price.
(b) The prices charged to DISTRIBUTOR for all Services ordered
hereunder shall be the lowest prices charged by SUPPLIER to any other person or
entity, other than Edison Development Corporation or an affiliate thereof, for
the same such Services in similar quantities during the four months preceding an
order, provided, however, in the event that any Services are included in
-------- -------
the price of a Product or Pre-Commercial Unit or are not charged for, a
reasonable price allocation shall be made with respect to such Services for
purposes of this pricing formula.
(c) All prices for the Products, Pre-Commercial Units, Test &
Evaluation Units, and Services shall be expressed in United States Dollars. All
payments for Products, Pre-Commercial Units, Test & Evaluation Units, and
Services shall be made in United States Dollars.
(d) To the extent DISTRIBUTOR assists SUPPLIER in sourcing components
for the manufacturing of Products or Pre-Commercial Units, DISTRIBUTOR will
receive 50% of any savings realized by SUPPLIER, for components of like quality
and quantity, where savings is defined as the difference between the best quote
obtained by SUPPLIER and the quote obtained by DISTRIBUTOR. DISTRIBUTOR's share
of any savings will be applied as a credit against DISTRIBUTOR's purchases of
Products or Pre-Commercial Units from SUPPLIER.
ARTICLE IV - TERM AND TERMINATION
4.1 Term. Except as otherwise provided in this Agreement, the term of this
----
Agreement shall begin thirty (30) days after the execution of this Agreement
(the "Commencement Date") and shall continue
-5-
<PAGE>
for a five (5) year term ending on the fifth anniversary of the Commencement
Date. The parties intend to negotiate an amendment to this Agreement which shall
set forth purchase prices for Products and DISTRIBUTOR's purchase commitments
for the period beyond the initial term. SUPPLIER and DISTRIBUTOR will initiate
negotiations on the amendment no later than January 1, 2002.
4.2 Termination for Cause. This Agreement shall terminate immediately in
---------------------
the event that DISTRIBUTOR is dissolved or the Limited Liability Company
Agreement under which DISTRIBUTOR is governed terminates, whichever occurs
first. This Agreement may be terminated by a party hereto prior to expiration of
the initial five (5) year term or any renewal term hereof by furnishing prior
written notice to the other party, as follows:
(a) Termination by a party, in the event the other party should fail
to perform any of its obligations hereunder and such failure results in a
material adverse effect to the terminating party, provided such other party
shall fail to remedy any such nonperformance within 120 days after receiving
written demand therefor, except as otherwise specified in Schedule D;
----------
(b) Termination by a party, if the other party should become a
subject of any voluntary or involuntary bankruptcy, settlement, receivership,
reorganization or other insolvency proceedings, unless such proceedings are
terminated within one month from their formal opening; or
(c) Termination by a party, if the other party should attempt to
sell, assign (in violation of this Agreement), delegate or transfer any of its
rights and obligations under this Agreement without having obtained the other
party's prior written consent thereto.
4.3 Rights of Parties on Termination or Expiration. The following
----------------------------------------------
provisions shall apply on the termination or expiration of this Agreement (the
date of termination or expiration being the "Termination Date"):
(a) DISTRIBUTOR shall cease all purchases from SUPPLIER and shall
return to SUPPLIER and immediately cease all use of Confidential Information
previously furnished by SUPPLIER and then in DISTRIBUTOR's possession; provided,
--------
however, notwithstanding the forgoing, (i) SUPPLIER shall fulfill any and all
- -------
orders for Products, Pre-Commercial Units or Services firmly committed to by
DISTRIBUTOR, in accordance with Schedule D, and (ii) DISTRIBUTOR shall have the
----------
right to continue to use such Confidential Information in connection with such
orders. SUPPLIER shall return to DISTRIBUTOR and immediately cease all use of
any Confidential Information previously furnished by DISTRIBUTOR, except as
needed to fulfill orders for Products, Pre-Commercial Units or Services firmly
committed to by DISTRIBUTOR, in accordance with Schedule D.
----------
(b) Except as otherwise provided herein, all rights granted to
DISTRIBUTOR under or pursuant to this Agreement shall cease, and where
appropriate, revert to SUPPLIER; similarly, all rights granted to SUPPLIER under
or pursuant to this Agreement shall cease, and where appropriate, revert to
DISTRIBUTOR.
(c) The provisions of this Agreement that are expressed to survive
this Agreement or to apply notwithstanding termination or expiration hereof
shall be followed by the parties hereto.
-6-
<PAGE>
(d) Termination or expiration of this Agreement shall not prejudice
or otherwise affect the rights or liabilities of the parties with respect to the
Products, Pre-Commercial Units or Services theretofore sold or rendered
hereunder, or any indebtedness then owing by either party to the other; nor
shall termination or expiration relieve the parties of any obligations imposed
by the provisions of this Agreement which are expressed to survive the
termination or expiration of this Agreement or any liability for damages
resulting from breach of such provisions.
ARTICLE V - OBLIGATIONS OF DISTRIBUTOR
5.1 Sales and Promotion; Services; Facilities, Personnel and Advertising.
--------------------------------------------------------------------
DISTRIBUTOR shall (a) use best efforts to market and sell Products and Pre-
Commercial Units and provide Services within the Territory; and (b) maintain, at
its own expense, such office space and facilities, and hire and train such
personnel as DISTRIBUTOR may deem necessary to carry out its obligations under
this Agreement. DISTRIBUTOR will use its best efforts to market and sell
Products and Pre-Commercial Units in the manner that its Affiliates market and
sell similar products, and to provide Services to ensure a level of customer
service consistent with that provided for other GE-branded products, taking into
consideration the lower sales volumes of Products and Pre-Commercial Units.
Within 60 days after the effective date of this Agreement, SUPPLIER and
DISTRIBUTOR will mutually agree to a marketing and Services development schedule
for the period ending December 31, 2000, which will include milestones and
objective measures of progress towards the January 1, 2001, Product release.
SUPPLIER and DISTRIBUTOR will meet not less than quarterly for the purpose of
evaluating DISTRIBUTOR's progress against the development schedule.
5.2 Purchase Volume Goal. During the Term of this Agreement, DISTRIBUTOR
--------------------
shall use its best efforts to achieve minimum Global Sales Commitments and Major
Market Sales Commitments as defined and specified in Schedule D. DISTRIBUTOR
----------
shall provide SUPPLIER with a 12-month rolling forecast of monthly purchases in
accordance with Schedule D. In the event that DISTRIBUTOR fails to achieve the
----------
minimum purchase volume goals set forth in Schedule D, SUPPLIER may appoint
-----------
additional distributors and/or terminate this Agreement under the provisions
specified in Schedule D. In the event that SUPPLIER appoints any additional
----------
distributors pursuant to the preceding sentence, DISTRIBUTOR may terminate this
Agreement upon 120 days written notice.
5.3 Expenses. Except as otherwise provided in this Agreement, DISTRIBUTOR
--------
shall bear all expenses associated with DISTRIBUTOR's marketing and sale of
Products and Pre-Commercial Units and provision of Services under this
Agreement.
5.4 DISTRIBUTOR Intelligence. DISTRIBUTOR shall make intelligence (e.g.,
------------------------
Product applications, customer demand) related to the sale and use of Products
and Pre-Commercial Units to Customers available to SUPPLIER (collectively,
"DISTRIBUTOR Intelligence").
5.5 Pre-Commercial Units. DISTRIBUTOR shall purchase, on a take or pay
--------------------
basis, 485 Pre-Commercial Units, as specified in Schedule B, for delivery by
----------
December 31, 2000, at a purchase price of $21,134 per unit, with no more than
250 units to be delivered in any one quarter. One-fourth of the purchase price
shall be paid to SUPPLIER as a deposit six months prior to delivery but no
earlier than January 1, 2000, and the balance of the purchase price shall be
paid on delivery. To the extent
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
-7-
<PAGE>
DISTRIBUTOR elects to purchase units available prior to the Pre-Commercial
Units, DISTRIBUTOR's purchases will be credited against its take-or-pay
commitment on a dollar-for-dollar basis (e.g., if DISTRIBUTOR purchases
$1,000,000 of Test & Evaluation Units available in 1999, DISTRIBUTOR'S take-or-
pay commitment on the Pre-Commercial Units will be reduced by $1,000,000).
DISTRIBUTOR will make reasonable efforts to have its Customers for Pre-
Commercial Units perform certain testing as prescribed by SUPPLIER, provide
SUPPLIER with all data generated by such testing, and provide SUPPLIER with
reasonable on-site access to the Pre-Commercial Units.
5.6 Assistance. DISTRIBUTOR shall, if required by SUPPLIER, provide
----------
SUPPLIER with reasonable access to and assistance of its sales and marketing
personnel. Such assistance shall be without charge to SUPPLIER except as may be
otherwise mutually agreed.
5.7 Regulatory Approvals. In conjunction with SUPPLIER's obligations in
--------------------
Section 6.6, DISTRIBUTOR shall be responsible for the administration and field
work necessary to obtain any regulatory approvals for DISTRIBUTOR to conduct its
operations in the Territory. DISTRIBUTOR shall provide assistance to SUPPLIER in
order to assist SUPPLIER in complying with registration requirements in the
Territory, obtain such other approvals from governmental authorities of the
Territory as may be necessary to comply with any and all governmental laws,
regulations, and orders that may be applicable to DISTRIBUTOR by reason of the
execution of this Agreement, and assist SUPPLIER in taking those actions
necessary for DISTRIBUTOR to be registered as SUPPLIER's independent distributor
with any governmental authority. Without limiting the foregoing, DISTRIBUTOR
shall furnish SUPPLIER with such documentation as SUPPLIER may request to
confirm DISTRIBUTOR's compliance with this Section, and DISTRIBUTOR agrees that
it shall not engage in any course of conduct that would cause SUPPLIER to be in
violation of the laws of any jurisdiction within the Territory. DISTRIBUTOR
shall comply fully with, and shall be solely responsible for, all safety
standards, health code requirements and regulations, specifications, and other
requirements imposed by law, regulation, or order in the Territory and
applicable to the marketing and sale of the Products and Pre-Commercial Units,
and to the provision of Services provided by DISTRIBUTOR.
ARTICLE VI - OBLIGATIONS OF SUPPLIER
6.1 Sales Support. SUPPLIER shall, at its expense, provide DISTRIBUTOR
-------------
with reasonable amounts of technical materials (e.g., drawings, schematics,
installation manuals, operating procedures, available marketing materials, field
test results, training materials) and available information regarding product
applications and customer demand pertaining to the Products and Pre-Commercial
Units as are requested by DISTRIBUTOR from time to time. All such information
and materials will be furnished in the English language.
6.2 Notification of Changes. SUPPLIER shall notify DISTRIBUTOR of any
-----------------------
material changes in or affecting the Products, Pre-Commercial Units, projected
delivery dates and schedule changes that may reasonably be expected to affect
the business of DISTRIBUTOR; provided, that no such notification shall relieve
--------
SUPPLIER of any of its obligations hereunder.
6.3 Assistance. SUPPLIER shall, if required by DISTRIBUTOR, provide
----------
DISTRIBUTOR with reasonable access to and assistance of its technical support
personnel. Such assistance shall be without charge to DISTRIBUTOR except as may
be otherwise mutually agreed.
-8-
<PAGE>
6.4 Insurance. SUPPLIER shall maintain in effect at all times product
---------
liability insurance with policy limits as described in Schedule E attached
----------
hereto, as such exhibit may be revised from time to time upon the mutual
agreement of SUPPLIER and DISTRIBUTOR, and DISTRIBUTOR shall be named as an
additional insured to each such policy. In the event that SUPPLIER cannot
obtain such insurance on commercially reasonable terms, SUPPLIER shall notify
DISTRIBUTOR, and DISTRIBUTOR may terminate this Agreement.
6.5 Third Party Inquiries. If SUPPLIER is contacted, or has been
---------------------
contacted, by third parties concerning purchase of the Products by Customers in
the Territory, SUPPLIER will use its best efforts to refer such persons to
DISTRIBUTOR, provided that SUPPLIER has not named any additional distributors to
the relevant market area in accordance with this Agreement.
6.6 Governmental Approvals; Compliance. SUPPLIER shall comply with all
----------------------------------
registration requirements in the Territory that are applicable to SUPPLIER,
obtain such other approvals from governmental authorities of the Territory as
may be necessary to comply with any and all governmental laws, regulations, and
orders that may be applicable to SUPPLIER by reason of the execution of this
Agreement, and take those actions necessary for DISTRIBUTOR to be registered as
SUPPLIER's independent distributor with any governmental authority. At
DISTRIBUTOR's request, SUPPLIER shall perform all tests for all certifications
(regulatory or otherwise) required to certify use of the Products and Pre-
Commercial Units sold by DISTRIBUTOR for stand-alone and/or grid-interconnected
stationary power applications. Without limiting the foregoing, SUPPLIER shall
furnish DISTRIBUTOR with such documentation as DISTRIBUTOR may request to
confirm SUPPLIER's compliance with this Section, and SUPPLIER agrees that it
shall not engage in any course of conduct that would cause DISTRIBUTOR to be in
violation of the laws of any jurisdiction within the Territory. If the cost of
compliance with regulatory requirements outside of the U.S. causes SUPPLIER's
direct cost per unit to exceed SUPPLIER's direct cost as shown on Schedule C,
----------
then SUPPLIER and DISTRIBUTOR will mutually agree to adjust the prices as shown
on Schedule C, and the Sales Commitments as shown on Schedule D, for any units
---------- ----------
purchased by DISTRIBUTOR for sale outside of the U.S. that require such
compliance.
6.7 Production Capability; Minimum Volume.
-------------------------------------
(a) SUPPLIER will use best efforts to maintain a minimum annual
Product supply of [***] units per year in "2001," as defined in Schedule D, plus
----------
any additional capacity required to fill any of DISTRIBUTOR'S firm purchase
orders; provided that DISTRIBUTOR stays on schedule, as determined in good faith
by SUPPLIER, in developing the infrastructure necessary to market, sell, and
provide Services to such volume of Products; and provided further that SUPPLIER
will not be obligated to increase Product supply by more than 100% between any
two quarters, and, in any event, SUPPLIER will not be obligated to increase
Product supply beyond the Global Sales Commitments.
(b) SUPPLIER will use best efforts to produce 485 Pre-Commercial
Units during the year 2000, and use best efforts to front load production in the
first half of the year.
(c) Supplier shall supply Products to DISTRIBUTOR at the lower of
(i) the pricess set forth on Schedule C, or (ii) [***]. Supplier shall supply
Pre-
Commerical Units to DISTRIBUTOR at the prices set forth on Schedule C. To the
extent that [***], Supplier and Distributor shall agree to [***]. If SUPPLIER
and DISTRIBUTOR cannot reach such agreements, then this Agreement shall
terminate.
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
-9-
<PAGE>
6.8 Legal Standards. SUPPLIER shall comply fully with, and shall be solely
---------------
responsible for, all safety standards, health code requirements and regulations,
specifications, and other requirements imposed by law, regulation, or order in
the Territory, that are applicable to the design, manufacturing, and testing of
the Products and Pre-Commercial Units and the provision of Services by SUPPLIER.
SUPPLIER shall establish and maintain a program, to the mutual satisfaction of
SUPPLIER and DISTRIBUTOR, in order to create ongoing product design,
manufacturing, testing, inspection, and other safety and quality-related
processes that are adequate to assure the safety and reliability of SUPPLIER's
Products and Pre-Commercial Units (the "Product Quality and Safety Assurance
Program").
6.9 Replacement Parts. SUPPLIER shall sell replacement parts to
-----------------
DISTRIBUTOR for the lower of (a) those prices set forth on Schedule C, attached
hereto, or (b) [***]. SUPPLIER shall maintain a reasonable supply of replacement
parts for the Products and Pre-Commercial Units throughout the design life of
the Products and Pre-Commercial Units, as set forth in SUPPLIER'S Product and
Pre-Commercial Unit Specifications.
6.10 Funding of GE Corporate Research and Development Support. SUPPLIER
--------------------------------------------------------
will enter into a separate service agreement with General Electric Company,
under which SUPPLIER will pay or obtain outside funding to pay General Company
$500,000 per year during the pre-commercial period (i.e., the period up to the
commercial release of Products) in exchange for support by the Corporate
Research and Development Department of General Electric Company of the
development and testing of Products, Pre-Commercial Units, and Test & Evaluation
Units, with specific projects to be specified by SUPPLIER in such separate
agreement. The failure of SUPPLIER to enter into such agreement shall constitute
cause for termination of this Agreement pursuant to Section 4.2(a), without
regard to materiality considerations. SUPPLIER will use reasonable efforts to
enter into such agreement within 90 days following the execution date of this
Agreement.
ARTICLE VII - CONFIDENTIAL INFORMATION AND PROPRIETARY RIGHTS
7.1 Confidentiality. SUPPLIER and DISTRIBUTOR agree to follow the
---------------
following requirements regarding confidentiality:
(a) Each party hereto expects to furnish to the other party certain
confidential information which will constitute trade secrets or other
proprietary business or technical information belonging to the disclosing party
(including, but not limited to, components, processes, financial information,
drawings, specifications and other data, whether in written, printed, oral or
other form) and will be marked "Confidential" or "Proprietary" (such information
is hereinafter referred to as "Confidential Information") at the time it is
disclosed. Oral information which is confidential or proprietary shall be
reduced to writing by the disclosing party within ten (10) working days after
disclosure, which writing shall
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
-10-
<PAGE>
specifically reference the date of disclosure and otherwise conform to the
requirements of this paragraph. Any information which is disclosed in any other
manner shall be deemed to be non-confidential. The receiving party shall not
disclose Confidential Information to anyone except its employees who have a need
to know such Confidential Information in order to perform their work and shall
inform such individuals of the confidential nature of the Confidential
Information. Subject to the provisions of subsection (b), below, the receiving
party shall use the Confidential Information only for the purpose of such work
and shall use efforts to protect the confidentiality of such Confidential
Information commensurate with those which it employs for the protection of its
own confidential information, but it shall not be liable for unauthorized
revelations of such Confidential Information which occur in spite of such
efforts.
(b) Notwithstanding the provisions of subsection (a) above, (i) the
receiving party shall not be subject to any restriction hereunder with respect
to any part of such Confidential Information which appears in issued patents or
publications, which is known or becomes generally known to the relevant public
through no fault of the receiving party, which is independently generated by the
receiving party without use of the Confidential Information, which is furnished
to others by the disclosing party without restriction on disclosure, which was
or becomes known to the receiving party through other sources free of any
confidentiality restriction, which must be disclosed by requirements of law or
valid legal or regulatory process, in which case the party intending to make
such disclosure shall notify the party which designated the material as
confidential in advance of any such disclosure and reasonably cooperate with any
attempt to maintain the confidentiality of such materials; and (ii) any and all
restrictions with respect to Confidential Information provided hereunder will
expire three (3) years after the date that such Confidential Information is
disclosed to the receiving party.
(c) When one party no longer desires to use the Confidential
Information of another party, it shall return to the other party any such
Confidential Information and shall destroy all copies of such Confidential
Information with the exception of one copy which may be retained exclusively for
the purpose of documenting the disclosures made hereunder.
(d) The receiving party will restrict access to any Confidential
Information made available or disclosed by the disclosing party to the receiving
party hereunder only to those employees of the receiving party with a need to
know such information in performance of their jobs with the receiving party.
7.2 SUPPLIER's Trademark. All of the Products and Pre-Commercial Units
--------------------
sold by DISTRIBUTOR shall bear one or more of SUPPLIER's trademarks, copies of
which are set forth on Schedule F, attached hereto. Such trademarks shall be
----------
affixed to the Products and Pre-Commercial Units by SUPPLIER, in a manner to be
mutually determined, with the understanding that SUPPLIER's trademarks will be
readily visible, but less prominent than DISTRIBUTOR's trademarks. All resulting
use of SUPPLIER's trademarks shall inure solely to the benefit of SUPPLIER.
DISTRIBUTOR shall not directly or indirectly use SUPPLIER's trademarks (or part
thereof), or any mark or name confusingly similar thereto, as part of its
corporate or business name, except that (a) DISTRIBUTOR shall co-brand (i.e.,
affixing DISTRIBUTOR's Trademark (defined below), a copy of which is also set
forth on Schedule F, to a Product or Pre-Commercial Unit that also bears the
----------
trademark of SUPPLIER) each of the Products and Pre-Commercial Units with its
own trademark or otherwise identify itself as an "authorized distributor" of
SUPPLIER and (b) DISTRIBUTOR shall use SUPPLIER's trademarks relating to the
Products and Pre-Commercial Units, for display, promotional, or advertising
purposes in connection with solicitation of orders for Products and Pre-
Commercial Units from
-11-
<PAGE>
Customers in the Territory and in any other manner approved by SUPPLIER in
writing. In addition, DISTRIBUTOR shall not register or attempt to register any
of SUPPLIER's trademarks or any mark or name closely resembling them, unless
requested to do so by SUPPLIER in writing.
SUPPLIER represents and warrants to DISTRIBUTOR that (a) SUPPLIER's
trademarks pertaining to the Products and Pre-Commercial Units are subject to
and protected by United States trademark law, applications for registration of
trademarks pertaining to the Products and Pre-Commercial Units have been filed
in the United States, and similar applications will be filed by SUPPLIER in
other countries of the Territory designated by DISTRIBUTOR; provided that in the
event that SUPPLIER does not agree to file any such application in any country
or other jurisdiction in the Territory, DISTRIBUTOR shall, in SUPPLIER's sole
discretion, (i) sell the Products or Pre-Commercial Units in such country or
other jurisdiction without SUPPLIER's trademark affixed, (ii) sell the Products
or Pre-Commercial Units in such country or other jurisdiction with a different
SUPPLIER trademark affixed (in which event, all of SUPPLIER's representations,
warranties, covenants, and indemnities herein shall apply to such substitute
trademark and the use thereof), or (iii) continue to sell the Products and Pre-
Commercial Units in such country or other jurisdiction with SUPPLIER's trademark
affixed (in which event, SUPPLIER shall indemnify DISTRIBUTOR against any and
all damages resulting from such sale in accordance with Sections 7.4 and 8.1(f);
(b) to SUPPLIER's knowledge, the trademarks set forth on Schedule F are owned by
----------
SUPPLIER; (c) to SUPPLIER's knowledge, SUPPLIER owns free and clear of any
mortgage, security interest, financing statement, royalty obligation, lien,
encumbrance, charge, option, equity or restriction, all right, title and
interest in and to the trademarks set forth on Schedule F and all patents that
----------
it owns or uses in connection with the Products and Pre-Commercial Units as of
the date hereof (except for a patent royalty obligation to the Los Alamos
National Laboratory); and (d) to SUPPLIER's knowledge, none of such trademarks
or patents infringes any existing intellectual property right of any third party
and there are no trademarks or trademark applications included in such
intellectual property rights which are invalid or unenforceable.
7.3 Intellectual Property. Each party's patents, trademarks, trade names,
---------------------
inventions, copyrights, know-how, trade secrets, licensed rights or other
intellectual property rights ("Intellectual Property") now in existence or
-
hereafter lawfully acquired or developed by such party shall not be deemed to be
transferred to any other party by virtue of this Agreement. DISTRIBUTOR shall
not have the right pursuant to this Agreement to manufacture, duplicate, or
otherwise copy or reproduce any of the Products, Pre-Commercial Units, or any
parts thereof. The use by either party of any Intellectual Property of the
other party is authorized only for the purposes herein set forth; and upon
termination of this Agreement for any reason, such authorization shall cease.
Notwithstanding the foregoing provisions of this Section 7.3, DISTRIBUTOR hereby
grants to SUPPLIER a perpetual non-exclusive, non-transferable, irrevocable,
royalty-free, fully paid up license to use Product information regarding market
size, demographics, demand, segmentation, design parameters sought by the
market, and contact information (names, addresses, telephone numbers) for
customers, resellers, service providers, code bodies, and similar information
acquired or developed by DISTRIBUTOR under this Agreement.
7.4 DISTRIBUTOR's Trademark. At the election of DISTRIBUTOR, SUPPLIER
-----------------------
shall (a) identify DISTRIBUTOR as an "authorized distributor" of SUPPLIER, (b)
affix to the Products and Pre-Commercial Units the General Electric Company
trademark licensed to DISTRIBUTOR ("DISTRIBUTOR's Trademark") as directed by
DISTRIBUTOR for the purpose of co-branding Products and Pre-Commercial Units
sold by DISTRIBUTOR (i.e., affixing DISTRIBUTOR's Trademark to a Product or Pre-
Commercial Unit that also bears the trademark of SUPPLIER), and (c) permit
DISTRIBUTOR's marketing and selling of co-branded Products
-12-
<PAGE>
and Pre-Commercial Units. In the event that DISTRIBUTOR elects not to have
SUPPLIER affix DISTRIBUTOR's Trademark to the Products and Pre-Commercial Units,
DISTRIBUTOR will affix DISTRIBUTOR's Trademark to the Products and Pre-
Commercial Units. DISTRIBUTOR shall use DISTRIBUTOR's Trademarks for display,
promotional, or advertising purposes in connection with solicitation of orders
for Products and Pre-Commercial Units from Customers in the Territory. The only
Products and Pre-Commercial Units that may bear DISTRIBUTOR's Trademark are
those that are sold by DISTRIBUTOR. SUPPLIER acknowledges that it is not
authorized to use DISTRIBUTOR's Trademark for any purpose unless expressly
permitted in writing to do so by DISTRIBUTOR. All resulting use of DISTRIBUTOR's
Trademark shall inure solely to the benefit of General Electric Company.
DISTRIBUTOR represents and warrants to SUPPLIER that (a) DISTRIBUTOR's
Trademark is subject to and protected by United States trademark law; (b) to
DISTRIBUTOR's knowledge, DISTRIBUTOR's Trademark is owned by General Electric
Company, and DISTRIBUTOR has a valid license to use DISTRIBUTOR's Trademark; (c)
to DISTRIBUTOR's knowledge, General Electric Company owns free and clear of any
mortgage, security interest, financing statement, royalty obligation, lien,
encumbrance, charge, option, equity or restriction, all right, title and
interest in and to DISTRIBUTOR's Trademark set forth on Schedule F; and (d) to
----------
DISTRIBUTOR's knowledge, DISTRIBUTOR's Trademark does not infringe on any
existing intellectual property right of any third party and is not invalid or
unenforceable.
7.5 Protection of Intellectual Property. In addition to any obligation
-----------------------------------
SUPPLIER may have under Article VIII hereof, SUPPLIER shall take all actions
reasonably necessary to enforce and protect its trademarks, patents, and
Intellectual Property Rights relating to the Products and Pre-Commercial Units.
Without limiting the generality of the foregoing, SUPPLIER shall defend and
indemnify DISTRIBUTOR against any suit, claim, or proceeding brought against
DISTRIBUTOR that is based on a claim that any trademark owned or used by
SUPPLIER directly in connection with any Product, Pre-Commercial Unit, or any
part thereof (except for DISTRIBUTOR's Trademark), as such trademark was affixed
to such Product, Pre-Commercial Unit, or part thereof in accordance with Section
7.2, infringes any intellectual property right of any third party in any country
or other jurisdiction in the Territory, if notified promptly in writing and
given authority, information, and assistance (at SUPPLIER's expense) for the
defense of same, and provided that such infringement did not arise as a result
of DISTRIBUTOR's unauthorized use of such trademark. SUPPLIER shall pay all
damages and costs awarded with respect to any suit, claim, or proceeding for
which SUPPLIER is required to provide indemnification pursuant to this Section
7.5. Without limiting the generality of the foregoing, SUPPLIER shall defend
and indemnify DISTRIBUTOR against any suit, claim or proceeding brought against
DISTRIBUTOR that is based on a claim that any Product or Pre-Commercial Unit, or
any part thereof, furnished under this Agreement, as well as any device or
process necessarily resulting from the use thereof, constitutes an infringement
of any patent of the United States (or any other country or other jurisdiction
in the Territory), if notified promptly in writing and given authority,
information, and assistance (at SUPPLIER's expense) for the defense of same, and
provided that such infringement did not arise as a result of (a) DISTRIBUTOR's
developments, misuse, or modifications that were not approved by SUPPLIER, or
(b) DISTRIBUTOR's combination, operation, or use with devices, data, equipment,
systems, programs, or products not furnished by SUPPLIER, contemplated by the
specifications in Schedule B, or approved by SUPPLIER, SUPPLIER shall pay all
----------
damages and costs awarded with respect to any suit, claim, or proceeding for
which SUPPLIER is required to provide indemnification pursuant to this Section
7.5. In the event a claim is made or appears likely to be made that any Product
or Pre-Commercial Unit, or any part thereof, furnished under this Agreement, as
well as any device or process necessarily resulting from the use thereof,
infringes upon a third party's patent, SUPPLIER shall, at its own expense and at
its option, and in
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<PAGE>
addition to all other rights or remedies which the DISTRIBUTOR may have pursuant
to this Agreement, (a) procure for DISTRIBUTOR the right to continue using said
Product, Pre-Commercial Unit, part, device, or process; (b) replace same with a
non-infringing equivalent; or (c) remove said Product, Pre-Commercial Unit,
part, device, or process and refund the purchase price and the transportation
and installation costs thereof.
ARTICLE VIII - INDEMNIFICATION
8.1 SUPPLIER's Indemnification of DISTRIBUTOR. SUPPLIER agrees to
-----------------------------------------
indemnify, defend and hold the DISTRIBUTOR, its officers, directors, employees,
successors, and permitted assigns harmless against all third party claims,
losses, costs, liabilities, judgments, damages, or expenses of whatever form or
nature, including attorneys' fees and other costs of legal defense, whether
direct or indirect, that they, or any of them, may sustain or incur as a result
of any acts or omissions (except for acts or omissions caused by the acts or
omissions of DISTRIBUTOR) of SUPPLIER or any of its directors, officers,
employees, Affiliates, or agents, including, but not limited to, (a) material
breach of any of the provisions of this Agreement; (b) negligence or other
tortious conduct; (c) representations or warranties made by SUPPLIER herein; (d)
violation by SUPPLIER or any of its directors, officers, employees, agents,
dealers, or subdistributors of any applicable law, regulation, or order of the
United States of America or of other countries in the Territory or other
applicable law; (e) competition by SUPPLIER or any of its Affiliates in the
Territory; (f) trademark infringement claims brought against DISTRIBUTOR
pertaining to DISTRIBUTOR's use of SUPPLIER's trademarks in accordance with
Section 7.5 hereof; or (g) patent infringement claims brought against
DISTRIBUTOR in accordance with Section 7.5 hereof.
8.2 DISTRIBUTOR's Indemnification of SUPPLIER. DISTRIBUTOR agrees to
-----------------------------------------
indemnify, defend and hold the SUPPLIER, its officers, directors, employees,
successors, and permitted assigns harmless against all third party claims,
losses, costs, liabilities, judgments, damages, or expenses of whatever form or
nature, including attorneys' fees and other costs of legal defense, whether
direct or indirect, that they, or any of them, may sustain or incur as a result
of any acts or omissions (except for acts or omissions caused by the acts or
omissions of SUPPLIER) of the DISTRIBUTOR or any of its directors, officers,
employees, Affiliates, or agents, including, but not limited to, (a) material
breach of any of the provisions of this Agreement; (b) negligence or other
tortious conduct; (c) representations or warranties made by DISTRIBUTOR herein;
(d) violation by DISTRIBUTOR or any of its directors, officers, employees or
agents, agents, dealers, or sub-distributors of any applicable law, regulation,
or order of the United States of America or of other countries in the Territory
or other applicable law; (e) competition by DISTRIBUTOR in the Territory; or (f)
trademark infringement claims brought against SUPPLIER pertaining to
DISTRIBUTOR's Trademark.
8.3 Scope of Indemnity. The parties' foregoing obligations to indemnify
------------------
each other shall include, but not be limited to, indemnification against all
expenses, including reasonable attorneys' and paralegals' fees at trial, on
appeal or otherwise, incurred in investigating and/or defending against any
claims, actions or liabilities for which indemnification is provided herein.
Each party hereto agrees to defend the other party hereto against any and all
claims, actions, and liabilities for which indemnification is provided herein,
whether such claims or actions are rightfully or wrongfully brought or filed.
Each party hereto further agrees to pay the amount of any compromise or
settlement. No indemnifying party shall be required to pay the indemnified
party any amount under this Article VIII unless and until the aggregate of such
amounts payable to such indemnified party shall reach $25,000, at which time the
indemnifying party shall become responsible for all such amounts (including the
initial $25,000); and the indemnification obligations of each party hereunder
shall
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<PAGE>
be limited to $1,000,000; provided, that this sentence shall not apply to the
indemnification obligations set forth in Section 8.1 (f) and (g) and Section 8.2
(f). The foregoing indemnification shall not in any manner limit a party's legal
remedies under applicable law against the other party for breaches of this
Agreement.
ARTICLE IX - GENERAL PROVISIONS
9.1 Disclosure. This Agreement may be discussed with, shown to, and filed
----------
with any government agency or official as determined to be appropriate by either
party, so long as the party making such disclosure, filing or discussion of this
Agreement provides the other party with ten (10) days prior written notice of
such proposed action.
9.2 Waiver. Each party agrees that the failure of the other party at any
------
time to require performance of any of the provisions herein shall not operate as
a waiver of the right of the other party to request strict performance of the
same or like provisions, or any other provisions hereof, at a later time.
9.3 Expenses. Except as otherwise provided herein, each party hereto shall
--------
bear its own costs and expenses associated with the negotiation, preparation,
delivery and performance of this Agreement.
9.4 Notices and Consents. All notices or consents hereunder shall be in
--------------------
the English language and shall be in writing and shall be deemed given (a) when
delivered personally, (b) five (5) days after deposit, postage prepaid, if
mailed by registered or certified mail, return receipt requested, or (c) upon
transmission if transmitted by telex or facsimile (with an electronic
confirmation thereof to the transmitter), to the parties at their respective
addresses set forth in the preamble of this Agreement (or at such other address
for a party as shall be specified by notice given hereunder):
If to SUPPLIER: PLUG POWER, L.L.C.
968 Albany-Shaker Road
Latham, New York 12110
Attn: Mr. Gary Mittleman
If to DISTRIBUTOR: GE FUEL CELL SYSTEMS, L.L.C.
1 River Road
Schenectady, New York 12345
Attn: Mr. Barry Glickman
9.5 Severability of Provisions. Wherever possible, each provision of this
--------------------------
Agreement shall be interpreted in such manner as to be effective and valid, but
if any provision of this Agreement shall be prohibited by applicable law,
unenforceable in any jurisdiction or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition,
unenforceability, or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement, or affecting the
validity or enforceability of such provision in any other jurisdiction.
9.6 Survival. Sections 4.3, 6.6 and 6.8 and Articles VII, VIII and IX of
--------
this Agreement shall continue and survive the termination hereof.
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<PAGE>
9.7 Language. The English language text, and American usage thereof, shall
--------
govern and control the interpretation of this Agreement and all writings between
the parties.
9.8 Entire Agreement; Amendment. This Agreement (including the exhibits
---------------------------
hereto and all documents and papers delivered pursuant hereto and any written
amendments hereof executed by the parties to this Agreement, as specified
herein) constitutes the entire agreement and supersedes all prior agreements and
understandings, oral and written, among the parties hereto with respect to the
subject matter hereof, it being understood and agreed that any business plan
that may hereafter be compiled or delivered shall be for informational purposes
only and shall not constitute any representation, warranty or covenant of
DISTRIBUTOR or SUPPLIER and shall not be deemed to be a part of this Agreement.
No course of prior dealings between the parties and no usage of trade shall be
relevant or admissible to supplement, explain or vary any of the terms of this
Agreement. This Agreement may be amended only by written agreement executed by
all of the parties hereto. Time is of the essence of this Agreement and each of
its provisions, and no extension of any time period shall be binding upon any of
the parties hereto unless expressly provided herein or in writing and signed by
all of the parties hereto.
9.9 Governing Law. The validity, construction, interpretation and
-------------
performance of this Agreement and all transactions under it shall be governed by
the laws of the State of New York exclusively (except that if any choice of law
provision under New York law would result in the application of the law of a
state or jurisdiction other than New York, such provision shall not apply). The
parties hereto expressly agree and acknowledge that the United Nations
Convention for the International Sale of Goods shall not apply to this
Agreement.
9.10 Miscellaneous. This Agreement may be executed in any number of
-------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The parties hereto shall
execute and deliver, or cause to be executed and delivered, such additional or
further transfers, assignments, endorsements or other instruments as the other
party or its counsel may reasonably request from time to time for purposes of
carrying out the transactions contemplated by this Agreement. The article and
section headings contained herein are for reference only and shall not be
considered as substantive parts of this Agreement. The use of the singular or
plural form shall include the other form and the use of the masculine, feminine
or neutered gender shall include the other gender. The words "hereof,"
"herein," and "hereunder" and words of similar import when used in this
Agreement, shall refer to this Agreement as a whole, including all exhibits
hereto, and not to any particular provision of this Agreement unless otherwise
specified; all references herein to paragraphs, sections, schedules or exhibits
shall refer to paragraphs or sections of this Agreement, or schedules or
exhibits to this Agreement. The parties hereto acknowledge and agree that the
recitals immediately following the preamble of this Agreement are true and
correct and are incorporated herein as a part of this Agreement. This Agreement
shall be binding upon the parties hereto and their successors and permitted
assigns and shall inure to the benefit of their successors and permitted
assigns.
9.12 Force Majeure. If the performance by either party of any non-monetary
-------------
obligation under this Agreement is delayed or prevented in whole or in part by
any cause not reasonably within its control (including, without limitation, acts
of God, war, civil disturbances, accidents, damage to its facilities, labor
disputes, acts of any governmental body not attributable to such party's failure
to comply with this Agreement, or failure or delay of third parties), it shall
be excused, discharged, and released of performance to the extent
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<PAGE>
such performance is so limited or prevented, without liability of any kind. Each
party shall use its reasonable efforts to minimize the duration and consequences
of any failure of or delay in performance resulting from a "Force Majeure"
event.
9.13 Limitation of Liability. In no case will SUPPLIER or DISTRIBUTOR be
-----------------------
liable to the other for special, incidental, or consequential damages,
including, but not limited to, personal injury, property damage, loss of profit
or revenues, or business interruption arising out of the manufacture, marketing,
distribution, sale, or supplying of the Products, Pre-Commercial Units, or
Services.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
SUPPLIER:
PLUG POWER, L.L.C.
By:/s/ Gary Mittleman
------------------------------------------
Gary Mittleman, President & CEO
DISTRIBUTOR:
GE FUEL CELL SYSTEMS, L.L.C.
By: /s/ Barry Glickman
------------------------------------------
Barry Glickman, President
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<PAGE>
TABLE OF SCHEDULES
------------------
Schedule A-1 - Products
- ------------
Schedule A-2 - Services
- ------------
Schedule B - Terms and Conditions of Purchase/Sale; Specifications
- ----------
Schedule C - Product and Pre-Commercial Unit Prices
- ----------
Schedule D - DISTRIBUTOR's Sales Commitments
- ----------
Schedule E - SUPPLIER's Insurance
- ----------
Schedule F - Trademark Registrations
- ----------
-1-
<PAGE>
SCHEDULE A-1
------------
DEFINITION OF PRODUCTS
The term "Products" shall include the following items manufactured by or on
behalf of SUPPLIER: Proton Exchange Membrane ("PEM") Fuel-Cell Powered Generator
Sets, without changes or additions (other than standard installation materials -
e.g., ducting, pipe, wire), and components (e.g., fuel processor, fuel cell
stack, power electronics), replacement parts, upgrades, accessories (e.g.,
combined power and hot water packages), and improvements, of various sizes no
larger than 35kW of maximum continuous output that (a) meet the Commercial Unit
Specifications set forth in Schedule B, and (b) are designed for use in
residential, commercial, and industrial stationary power applications (e.g.,
base load power, peaking power, emergency back-up power, enhanced power quality,
cogeneration, trailer-mounted units for temporary stationary power and/or rental
power use).
The term "Products" excludes the following, regardless of their
manufacturer:
1. PEM Fuel Cell-Powered Generator Sets and/or components designed for use in
transportation or vehicle applications;
2. PEM Fuel Cell-Powered Generator Sets and/or components designed for use in
extended run, uninterruptible power supply ("UPS") systems for data centers
applications, where the PEM Fuel Cell-Powered Generator Set (a) produces DC
or AC premium (i.e., superior power quality to the grid) power for data
center supporting information technology ("IT") equipment, (b) does not
provide power to the entire facility, (c) is installed at a sub-panel
downstream from the customer's main distribution panel, (d) is designed to
enable remote IT equipment shutdown and power cycling for IT equipment that
is no longer responding to commands, and (e) is designed to promote
reliability over efficiency;
3. PEM Fuel Cell-Powered Generator Sets and/or components for rack-mounted
equipment in telecommunications, cellular, or cable television applications;
and
4. PEM Fuel Cell-Powered Generator Sets and/or components that are integrated
with another device that utilizes all of the electrical output of the Fuel
Cell-Powered Generator Set for that specific device only (e.g., an air
conditioner powered by a Fuel Cell-Powered Generator Set, but not a combined
Fuel Cell-Powered Generator Set-chiller cogen unit).
-2-
<PAGE>
SCHEDULE A-2
------------
SERVICES
--------
The term "Services" shall include the following activities associated with
the Products and Pre-Commercial Units:
Installation
Permitting
Application Engineering
Operation
Routine Maintenance
Unscheduled Maintenance
Repair
Overhaul (e.g., stack replacement)
Upgrade
Remote monitoring, diagnostics, and/or control (i.e., dispatch)
Operator and Customer Training
Customer Service
Customer Support
-3-
<PAGE>
SCHEDULE B
----------
TERMS AND CONDITIONS OF PURCHASE/SALE
1. ACCEPTANCE OF TERMS AND CONDITIONS. (a) DISTRIBUTOR and SUPPLIER agree to
be bound by and to comply with all the terms and conditions in and referred to
in this Schedule B, as well as those appearing elsewhere in the Agreement (to
----------
which the section references contained herein apply), in any supplements hereto
and in all specifications and other documents referred to herein. (b) An order
by DISTRIBUTOR or the acceptance of an order by SUPPLIER does not constitute an
acceptance by the DISTRIBUTOR or SUPPLIER of any offer to sell, any quotation,
or any proposal, other than under the terms and conditions contained in this
Agreement. ANY PURCHASE ORDER, ATTEMPTED ACKNOWLEDGMENT OF AN ORDER, OR ANY
DOCUMENT CONNECTED THEREWITH, CONTAINING TERMS AND CONDITIONS INCONSISTENT WITH
OR IN ADDITION TO THE TERMS AND CONDITIONS IN THIS SCHEDULE B IS NOT BINDING
----------
UPON DISTRIBUTOR OR SUPPLIER UNLESS SPECIFICALLY ACCEPTED BY DISTRIBUTOR AND
SUPPLIER IN WRITING.
2. PRICES AND PAYMENTS. SUPPLIER's prices are firm, are as specified in
Schedule C and shall not be subject to change, except as provided in this
- ----------
Agreement and Schedule C. SUPPLIER's total price is FOB SUPPLIER's designated,
----------
continental U.S. manufacturing facility, unless otherwise agreed in writing by
SUPPLIER and DISTRIBUTOR. All prices are exclusive of any applicable federal,
state, or local sales, use, excise, or other similar taxes, provided, however,
that any such taxes to which SUPPLIER becomes subject as a result of
manufacturing, having manufactured, or procuring Products or Pre-Commercial
Units, shall be borne by SUPPLIER. No extra charges of any kind will be allowed
unless specifically agreed to in writing by DISTRIBUTOR. Unless otherwise agreed
between SUPPLIER and DISTRIBUTOR, payments shall become due 45 days from receipt
of invoice. In the event of delay in payment, DISTRIBUTOR will pay SUPPLIER a
late fee equal to the lesser of 1.5%, or the maximum rate allowable by law, of
any unpaid balance per month of delay or the maximum rate allowable by law.
DISTRIBUTOR must make payment when due, without offset, deduction, or
counterclaim, regardless of any claim by DISTRIBUTOR.
3. DELIVERY AND PASSAGE OF TITLE. Time is of the essence of all purchase
orders, except that delivery dates will be framed in terms of calendar months
and orders will not be deemed late until after the end of such calendar month.
If SUPPLIER fails to deliver the Products or Pre-Commercial Units or to complete
any Services furnished hereunder, then DISTRIBUTOR shall be entitled, in
addition to the remedies available elsewhere under the Agreement, to assess an
amount, as liquidated damages for delay, equal to 1% of the total dollar value
of DISTRIBUTOR's order for the first month of delay and 2% of the total dollar
value of DISTRIBUTOR's order per subsequent month of delay; provided, (a) that
such remedy will be capped at 6%, (b) if the order is more than three months
late, then DISTRIBUTOR may cancel the order, and (c) such liquidated damages
will only be available to DISTRIBUTOR for those orders to the extent that
DISTRIBUTOR has provided such remedy to its Customer. SUPPLIER agrees that such
amounts are a reasonable pre-estimate of the damages which DISTRIBUTOR may
suffer as a result of such delay, and are to be assessed as liquidated damages
and not as a penalty. Where such liquidated damages are available to
DISTRIBUTOR, they shall be DISTRIBUTOR's only remedy for SUPPLIER's failure to
make timely delivery, other than the remedies for non-performance expressly set
forth in this Agreement.
Products or Pre-Commercial Units which will be shipped from within the United
States for delivery within the United States shall be delivered FOB SUPPLIER's
designated, continental U.S. manufacturing facility, unless otherwise agreed in
writing by SUPPLIER and DISTRIBUTOR. Products or Pre-Commercial Units delivered
to DISTRIBUTOR in advance of schedule may be returned to SUPPLIER at SUPPLIER's
expense. Title shall pass to DISTRIBUTOR upon delivery to DISTRIBUTOR FOB
SUPPLIER's designated, continental U.S. manufacturing facility.
4. CHANGES. The DISTRIBUTOR may at any time, in writing, request changes
within the general scope of a purchase order in (a) specifications, where the
Products or Pre-Commercial Units to be furnished are to be specifically
manufactured in accordance therewith, (b) method of shipment or packing, or (c)
place and time of delivery. Any such change shall be authorized only by an
amendment executed by SUPPLIER and DISTRIBUTOR, with such amendment to specify
any additional expense, to be borne by DISTRIBUTOR.
5. INSPECTION. (a) All Products and Pre-Commercial Units shall be subject to
inspection and test by DISTRIBUTOR at reasonable times and places upon
reasonable notice, including the place of manufacture (which SUPPLIER shall use
reasonable efforts to arrange, including providing for such access in SUPPLIER's
purchase orders to the manufacturer); (b) If any inspection or test is made on
the premises of SUPPLIER, then SUPPLIER, without additional charge, shall
provide reasonable facilities and assistance for the safety and convenience of
the inspectors in the performance of their duties, provided that the inspectors
must execute SUPPLIER's standard confidentiality agreement, must abide by such
facility's rules and regulations, and must be covered by insurance for
occurrences other than due to SUPPLIER's negligence or willful misconduct; and
(c) SUPPLIER shall provide and maintain a program, to the mutual satisfaction of
SUPPLIER and DISTRIBUTOR, in order to create ongoing product design,
manufacturing, testing, inspection, and other safety and quality-related
processes that are adequate to assure the safety and reliability of SUPPLIER's
Products and Pre-Commercial Units (the "Product Quality and Safety Assurance
Program"). Records of all inspection work by SUPPLIER shall be kept complete and
available to DISTRIBUTOR during the performance of a purchase order and for
three (3) years from the date of such inspection. SUPPLIER will allow
representatives of DISTRIBUTOR access to the facilities involved in performing
an order for purposes of reviewing the status and progress of production.
6. REJECTION. If any of the Products, Pre-Commercial Units or Services (to the
extent that SUPPLIER is providing Services) ordered are found by DISTRIBUTOR
within 30 days of delivery to be defective, or otherwise not in conformity with
the requirements of the order, including any applicable specifications,
SUPPLIER, at its option and sole discretion may: (a) instruct DISTRIBUTOR to
return such goods at SUPPLIER's expense; (b) request that DISTRIBUTOR, with
DISTRIBUTOR's written approval, take such actions as may be required to cure all
defects and/or bring the Products or Pre-Commercial Units into conformity with
all requirements, in which event any reasonable costs and expenses thereby
incurred by DISTRIBUTOR, including material and handling charges, will be at
SUPPLIER's expense; and (c) re-perform, at SUPPLIER's own expense, any defective
portion of the Services performed, to the extent that SUPPLIER is performing
Services. DISTRIBUTOR must notify SUPPLIER in writing of such defect or
non-conformity within 30 days after delivery of the Products or Pre-Commercial
Units or performance of Services, if applicable, or DISTRIBUTOR's rights under
this Section 6 shall be waived. The remedies in this Section 6 shall be
DISTRIBUTOR's exclusive remedies under this Section 6.
7. WARRANTIES. (a) SUPPLIER will convey clear title to all Products and
Pre-Commercial Units to DISTRIBUTOR as provided hereunder; (b) SUPPLIER warrants
and represents that all Products, Pre-Commercial Units and Services (to the
extent that SUPPLIER provides Services) sold hereunder or pursuant hereto will
be free from all material defects in workmanship and material, and that the
Products, Pre-Commercial Units and Services (to the extent that SUPPLIER
provides Services) are provided in strict accordance with the specifications set
forth in Schedule B, and (c) Except as provided by this Agreement, any attempt
----------
by SUPPLIER to limit, disclaim, or restrict any such warranties or any remedies
of DISTRIBUTOR, except as limited by this Agreement, by acknowledgment or
otherwise, in accepting or performing an order, shall be null, void and
ineffective without DISTRIBUTOR's written consent. For Products purchased under
this Agreement, the foregoing warranties shall apply for a period of the lesser
of twelve (12) months from the date of installation or eighteen (18) months from
delivery to DISTRIBUTOR. For Pre-Commercial Units purchased under this
Agreement, the foregoing warranties shall apply for a period of the lesser of
one (1) month from the date of installation or two (2) months from delivery to
DISTRIBUTOR. For any product or component purchased by SUPPLIER with a warranty
coverage available to DISTRIBUTOR for the relevant components. The foregoing
warranties are conditioned upon (a) proper storage, handling, transportation,
installation, use, repair, and maintenance, and conformance with any reasonable
recommendations of SUPPLIER, and (b) DISTRIBUTOR's promptly notifying SUPPLIER
of any defects and, if required, promptly making the Product or Pre-Commercial
Unit available for correction. The foregoing warranties are provided at no cost
to DISTRIBUTOR or Customers.
If any Product or Pre-Commercial Unit fails to meet the foregoing warranties
during the warranty periods set forth above, SUPPLIER shall thereupon correct
any such failure by either (with such choice to be solely SUPPLIER's) (a)
repairing the defective Product or Pre-Commercial Unit, or (b) replacing the
defective Product or Pre-Commercial Unit. All costs associated with such repair
or replacement, including any transportation costs, shall be the sole
responsibility of SUPPLIER, subject to the limitations set forth in the Service
Agreement described in the next paragraph.
DISTRIBUTOR will provide the labor, transportation, and other Services necessary
for such repairs and replacements pursuant to a Service Agreement that will be
mutually agreed between SUPPLIER and DISTRIBUTOR. If such Service Agreement is
not agreed to by June 1, 2000, then this Distributor Agreement will terminate.
The Service Agreement will set forth limits on SUPPLIER's reimbursement to
DISTRIBUTOR for labor, transportation, and other Services. The Service Agreement
will also set forth a warranty approval process that will include pre-approval
of major warranty claims prior to commencement of work, submission of all
warranty claims for review and approval by SUPPLIER, and return of all parts
subject to warranty claims to SUPPLIER.
For Products, SUPPLIER will provide DISTRIBUTOR with the option of purchasing an
extension to the initial warranty period. Such additional warranty period will
be for three years beyond the termination of the initial warranty period, and
will cover the fuel cell stack, control system, power conditioning system
(excluding batteries and recharger), and fuel processor (i.e., the extended
warranty covers all components except for the air humidifier assembly,
humidifier pump, system frame assembly, package skin assembly, manifold
assemblies, electrical harness assemblies, coolant pump and fan, cooling system
heat exchanger, fuel cell air blower, particulate air filter, air regulator,
water deionizing and purification system, batteries, recharger, and fuel
processing auxiliaries). The price for such warranty extension, if purchased,
will not exceed $750, to be paid as a lump sum at the time of Product purchase,
for Products purchased in "2001", as defined in Schedule D, and $500 for
----------
Products purchased thereafter. The extended warranty price for "2001" is
not firm and will become firm no later than April 1, 2000. In the event that the
extended warranty price for "2001" exceeds $750, then SUPPLIER and DISTRIBUTOR
shall agree to a decrease to DISTRIBUTOR's Sales Commitments. If SUPPLIER and
DISTRIBUTOR cannot reach such agreement, then this Agreement shall terminate.
For Pre-Commercial Units, SUPPLIER will provide DISTRIBUTOR with the option of
purchasing an extension to the initial warranty period. Such additional warranty
period will be for one year beyond the termination of the initial warranty
period, and SUPPLIER will provide a firm price no later than October 1, 1999.
THE WARRANTIES SET FORTH IN THIS SECTION 7 ARE IN LIEU OF ALL OTHER WARRANTIES,
WHETHER ORAL, WRITTEN, EXPRESS, OR IMPLIED, INCLUDING WITHOUT LIMITATION IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. SUPPLIER'S
WARRANTY OBLIGATIONS AND DISTRIBUTOR'S REMEDIES UNDER THIS SECTION 7 (EXCEPT AS
TO TITLE) ARE SOLELY AND EXCLUSIVELY AS STATED HEREIN.
8. PROPER BUSINESS PRACTICES. SUPPLIER and DISTRIBUTOR shall comply with all
laws dealing with improper or illegal payments, gifts or gratuities, and
SUPPLIER and DISTRIBUTOR agree not to pay, promise to pay or authorize the
payment of any money or anything of value, directly or indirectly to any person
for the purpose of illegally or improperly inducing a decision or obtaining or
retaining business in connection with a purchase order.
9. COMPLIANCE WITH LAWS. SUPPLIER and DISTRIBUTOR agree to comply with the
applicable provisions of any federal, state, provincial or local law or
ordinance and all lawful orders, rules, and regulations issued thereunder. No
forced or prison labor may be used in manufacturing the products to be supplied
under this Agreement. If forced or prison labor is determined to have been used
in the manufacture of the Products or Pre-Commercial Units supplied hereunder,
the DISTRIBUTOR shall have the right to immediately terminate the purchase order
and this Agreement without further compensation to the SUPPLIER; and, in such
case, DISTRIBUTOR shall return to SUPPLIER any Products or Pre-Commercial Units
for which it has not yet made payment.
Provisions applicable to orders for work to be performed, goods to be produced,
or services to be rendered within the United States. (a) SUPPLIER shall comply
with any provisions, representations or agreements or contractual clauses
required thereby to be included or incorporated by reference or operation of law
in the contract resulting from acceptance of this order and dealing with: (i)
Equal Opportunity (Executive Order 11246 as amended by Executive Orders 113575
and 10286 and applicable regulations promulgated pursuant thereto); (ii)
Employment of Veterans (Executive Order 11701 and applicable regulations
promulgated pursuant thereto); (iii) Employment of the Handicapped (Executive
Order 11758 as amended by Executive Order 11867 and applicable regulations
promulgated pursuant thereto); (iv) Employment Discrimination Because of Age
(Executive Order 11141 and applicable regulations promulgated pursuant thereto);
and (v) Utilization of Disadvantaged and Business Enterprises (Executive Order
11625, Public Law 95-507 and applicable regulations promulgated pursuant
thereto). (b) SUPPLIER certifies that with respect to orders which exceed
$10,000 it is in compliance with the requirements for non-segregated facilities
set forth in 41 CFR Chapter 60-1.8. (c) SUPPLIER warrants that each chemical
substance constituting or contained in goods sold or otherwise transferred to
DISTRIBUTOR hereunder is on the list of chemical substances compiled and
published by the Administrator of the Environmental Protection Administration
pursuant to the Toxic Substances Control Act (P.L. 92-573 as amended, and the
Federal Hazardous Substances Act (P.L. 92-516) as amended and lawful standards
and regulations thereunder. (d) In accepting an order SUPPLIER represents that
the goods to be furnished thereunder were or will be produced in compliance with
the requirements of the Fair Labor Standards Act of 1938, as amended, including
Section 12(a) and SUPPLIER shall insert a certificate to that effect on all
invoices submitted in connection with such order.
10. PACKING, PRESERVATION AND MARKING. Packing, preservation and marking
requirements will be in accordance with the specification drawing or as
otherwise agreed by SUPPLIER and DISTRIBUTOR. If none are specified, SUPPLIER
shall use the commercially accepted practice.
11. YEAR 2000 COMPLIANCE WITH DATE PROCESSING REQUIREMENTS. In addition to any
other warranties and representations provided by SUPPLIER to DISTRIBUTOR,
whether pursuant to this Schedule B, by law, equity, or otherwise, SUPPLIER
----------
represents, warrants and covenants that (a) any Product(s), Pre-Commercial
Unit(s) and/or Service(s) provided by SUPPLIER hereunder, including, without
limitation, each item of hardware, software, or firmware; any system, equipment,
or products consisting of or containing one or more thereof; and any and all
enhancements, upgrades, customizations, modifications, maintenance and the like,
performed approved, or contained in official documentation provided by SUPPLIER
("Products/Services") shall be Year 2000 Compliant at the time of delivery and
at all times thereafter and in all subsequent updates or revisions of any kind,
and (b) SUPPLIER's supply of the Products/Services to DISTRIBUTOR shall not be
interrupted, delayed, decreased, or otherwise materially affected by dates prior
to, on, after or spanning January 1, 2000. For purposes of this purchase order,
the term "Year 2000 Compliant" means that (1) the Products/Services accurately
process, provide and/or receive date data, within, from, into, and between
centuries (including without limitation, the twentieth and twenty-first
centuries, the last year of a century (e.g., 1999) and the first year of the
next century (e.g., 2000)), and leap year calculations, and (2) neither the
performance nor the functionality nor SUPPLIER's supply to DISTRIBUTOR of the
Products/Services will be materially affected by dates prior to, on, after, or
spanning January 1, 2000. Moreover, SUPPLIER covenants and agrees that the
design of said Products/Services to ensure compliance with the foregoing
warranties, representations and covenants shall include, without limitation,
date data century recognition, and date data interface values that reflect the
century. In particular, but without limitation, (i) no value for current date
will cause any error, interruption, or decreased performance in the operation of
such Products/Services, (ii) all manipulations of date-related data (including,
but not limited to, calculating, comparing, sequencing, processing, and
outputting) will produce correct results for all valid dates, (iii) date
elements in interfaces and data storage will specify the correct century to
eliminate date ambiguity without human intervention, including leap year
calculations, (iv) where any date element is represented without a century, the
correct century will be unambiguous for all manipulations involving that
element, (v) authorization codes, passwords, and zaps (purge functions) should
function normally and in the same manner prior to, on, after and spanning
January 1, 2000, including, without limitation, the manner in which they
function with respect to expiration dates and CPU serial numbers. No obligation
of SUPPLIER under a purchase order pursuant to this Agreement shall be excused
by reason of the failure of SUPPLIER's or any other person's products or
services to be Year 2000 Compliant, nor shall such occurrence(s) be deemed a
force majeure event. As used herein or in a purchase order, the words "date" and
"dates" shall be deemed to include "time".
In the event of breach of this warranty, in addition to any other remedies
DISTRIBUTOR may have, whether pursuant to this Schedule B, by law, equity or
----------
otherwise, DISTRIBUTOR shall, at SUPPLIER's option, be entitled to repair or
replacement of any non-compliant Products/Services, at SUPPLIER's cost, within
thirty (30) days after notice of breach from DISTRIBUTOR to SUPPLIER. In
addition to SUPPLIER'S obligations as set forth above, SUPPLIER shall indemnify
and hold DISTRIBUTOR harmless from and against any claims, costs, losses,
damages, or expenses (including reasonable attorneys' fees) incurred by
DISTRIBUTOR as a result of any failure of any Products/Services to be Year 2000
Compliant. Notwithstanding anything herein to the contrary, the liability of
SUPPLIER for a breach of SUPPLIER's Year 2000 Compliant representation, warranty
and agreement set forth herein shall not be subject to any limitations or
exclusions of remedies or warranties, if any, contained in a purchase order or
any other agreement between the parties.
Notwithstanding anything in a purchase order or in this Agreement to the
contrary, the period of the representations, warranties and covenants set forth
in this section shall extend at least until January 31, 2001. Any statute of
limitations that might be applicable to SUPPLIER's Year 2000 Compliant warranty
and representation shall not accrue or begin to run until the later of January
31, 2001, or the time when such statute of limitations would otherwise accrue or
begin to run, and, with respect to any claim based on any failure of the
Products/Services to be Year 2000 Compliant, SUPPLIER shall not assert any
defense based on or alleging the passage of time from the effective date of a
purchase order to January 31, 2001.
12. LIMITATION OF LIABILITY. In no case will SUPPLIER or DISTRIBUTOR be liable
for the other's special, incidental, or consequential damages, including, but
not limited to, personal injury, property damage, loss of profit or revenues, or
business interruption arising out of the manufacture, marketing, distribution,
sale, or supplying of the Products, Pre-Commercial Units, or Services.
The remedies available to DISTRIBUTOR hereunder may be asserted only by
DISTRIBUTOR and by no other party. DISTRIBUTOR may not expand warranty coverage
to Customers beyond the coverage specifically described herein, except as agreed
in writing by SUPPLIER.
SCHEDULE B (continued)
----------------------
Pre-Commercial Unit
Performance Specifications
Note: SUPPLIER and DISTRIBUTOR recognize that these specifications may change
- -------------------------------------------------------------------------------
based on further analysis of residential load profiles and field testing. If
- -----------------------------------------------------------------------------
SUPPLIER and DISTRIBUTOR mutually agree to change the specifications set forth
- ------------------------------------------------------------------------------
below, SUPPLIER and DISTRIBUTOR agree to adjust the prices and purchase volumes
- -------------------------------------------------------------------------------
set forth in Schedule C.
- ------------------------
Testing protocol and acceptance criteria:
- -----------------------------------------
On or before October 1, 1999, DISTRIBUTOR and SUPPLIER will agree on the
specific testing protocol and acceptance criteria for all Pre-Commercial Units
("PCUs") purchased by DISTRIBUTOR. The protocol and acceptance criteria will (a)
incorporate the field test results from the "Test and Evaluation Units" ("TEUs")
that SUPPLIER expects to have available beginning the second quarter of 1999;
and (b) address all aspects of PCU system and component performance that are
expected to impact regulatory approvals and end-user economics, including, but
not limited to, useful life, output, reliability, efficiency, operating
environment requirements, power quality, load following capability, and
emissions. In the event that DISTRIBUTOR and SUPPLIER are unable to agree on the
testing protocol and/or acceptance criteria this Agreement will terminate.
Packaging:
- ----------
PCU product design will be complete to the point where interfaces between
major components (e.g., stack, reformer, inverter, etc.) will be similar to that
of the final Product. The overall PCU package size and weight must be suitable
for installation outside of a typical single family residence (and, where
practicable, inside a typical single family residence).
Certifications:
- ---------------
Certifications (e.g., UL, NFPA, AGA, FCC Class B) are not required for the
PCUs. However, PCUs must meet any customary local codes and regulations required
for field testing by DISTRIBUTOR's Customers. To the extent the test site
requires preparation to meet local codes, any site improvements will be at the
Customer's expense.
Technology:
- -----------
Basic technology of all major PCU components must be the same as that of
the Product; however, suppliers and manufacturers of the major components need
not be the same as those for the Product.
Interconnection:
- ----------------
PCUs will be capable of interconnection to the electrical system of a
typical single family residence; provided however that the PCU will operate
isolated from the grid with the use of a transfer switch ("stand-alone
operation"). The transfer switch will, in the event that the PCU fails or is
interrupted, transfer the household load from the PCU back to the utility grid
within no more than one-tenth of a second.
Installation:
- -------------
PCUs must be in compliance with any applicable NEC installation
requirements.
Documentation:
- --------------
PCUs must be shipped with sufficient documentation (e.g., installation
drawings, operating manuals, repair guides) to allow for start-up and Service by
individuals with a skill level comparable to a typical HVAC technician, after
such individual has completed the SUPPLIER training program or a training
program approved by SUPPLIER.
PCUs must be provided in strict accordance with samples, drawings, and/or
designs provided by SUPPLIER and approved in writing by SUPPLIER and
DISTRIBUTOR.
Technical Support:
- ------------------
SUPPLIER will make available by telephone to DISTRIBUTOR and its Customers
PCU technical support during SUPPLIER's normal business hours. SUPPLIER will
also establish a 24-hour telephone number to accommodate emergency calls from
DISTRIBUTOR and its Customers.
Shipping:
- ---------
SUPPLIER will prepare all PCUs to allow for standard commercial shipment
(e.g., truck, rail, cargo ship) to Customer locations.
Monitoring & Diagnostics:
- -------------------------
PCUs will be designed to accommodate remote monitoring and diagnostics
("RM&D") equipment (e.g., modems, data collection/storage). RM&D equipment will
be provided, installed, and operated at DISTRIBUTOR's or its Customers' expense.
At a minimum, the PCU control system will allow the RM&D equipment to monitor
the following parameters:
Current System Status
Output Power
Voltage
Current
Others - TBD*
Assumptions:
- -------------
Plug Power assumed the following in developing the specifications set forth
below:
(a) Natural gas line pressure at [***] or greater; and
(b) Average system usage of [***].
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Specification PCU
- ----------------------------------------------------------------------------------------------
<S> <C>
kW output rating 7kW continuous, [***] operating design point, [***]
for [***]
- ----------------------------------------------------------------------------------------------
Voltage/frequency [***]
- ----------------------------------------------------------------------------------------------
Operating design point efficiency (i.e., [***]
efficiency at [***] output)
- ----------------------------------------------------------------------------------------------
Continuous capacity output efficiency [***]
(i.e., efficiency at 7kW output)
- ----------------------------------------------------------------------------------------------
Phase [***]
- ----------------------------------------------------------------------------------------------
Fuel capability ([***] by [***]
SUPPLIER will be fueled by [***]
will be fueled by [***] unless notified by
DISTRIBUTOR in writing 12 months prior
to PCU delivery)
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Specification PCU
- ----------------------------------------------------------------------------------------------
<S> <C>
Allowable fuel contaminants Must be able to operate on [***].
For NG:
Sulfur ___ TBD*
Alkalis ___ TBD*
Water ___ TBD*
Nitrogen ___ TBD*
Non-Methane Hydrocarbons ____ TBD*
Methane ___ TBD*
For LPG: _______ TBD*
For Methanol: _______ TBD*
- ----------------------------------------------------------------------------------------------
System make up water requirements Must be able to operate on [***].
Iron (PPM maximum) ___ TBD*
Calcium (PPM maximum) ___ TBD*
Chlorine (PPM maximum) ____ TBD*
Particulate (PPM maximum) ___ TBD*
Other ______ (PPM maximum) ____ TBD*
- ----------------------------------------------------------------------------------------------
Noise ____ dBa (TBD*) [***]
____ dBa (TBD*) [***]
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Specification PCU
- -----------------------------------------------------------------------------------------------
<S> <C>
Operating environment requirements Must be able to operate [***].
Humidity
maximum ____% TBD*
minimum ____% TBD*
Salt in Air
maximum ____% TBD*
minimum ____% TBD*
Particulate [***]
maximum ____% TBD*
minimum ____% TBD*
Other Cathode contaminant(s) [***]
maximum ____% TBD*
minimum ____% TBD*
- -----------------------------------------------------------------------------------------------
Emissions - TBD*
_ NOx (NG) ____/____ (maximum/target)
_ CO (NG) ____/____ (maximum/target)
_ NOx (LPG) ____/____ (maximum/target)
_ CO (LPG) ____/____ (maximum/target)
_ NOx (Methanol) ____/____ (maximum/target)
_ CO (Methanol) ____/____ (maximum/target)
- -----------------------------------------------------------------------------------------------
Ambient temperature range [***]
- -----------------------------------------------------------------------------------------------
Altitude [***]
- -----------------------------------------------------------------------------------------------
Power conditioning system [***]
- ----------------------------------------------------------------------------------------------
Overload [***] [***]
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Specification PCU
- ----------------------------------------------------------------------------------------------
<S> <C>
Harmonics Harmonics at 7 kW continuous operation to
satisfy [***], for harmonic voltages.
Harmonics at [***] will be subject to [***].
- ----------------------------------------------------------------------------------------------
Power quality (isolated)
- ----------------------------------------------------------------------------------------------
Voltage, steady state (up to [***] kW Reference [***]
continuous)
- ----------------------------------------------------------------------------------------------
Voltage, transient (up to overload [***]
rating)
- ----------------------------------------------------------------------------------------------
Control Suitable for isolated operation
- ----------------------------------------------------------------------------------------------
Communications [***] similar as needed to establish
communications links
- ----------------------------------------------------------------------------------------------
Grid connection [***]
- ----------------------------------------------------------------------------------------------
MTB stack replacement TBD*
[***]
- ----------------------------------------------------------------------------------------------
MTB system (i.e., PEM Fuel Cell-Powered TBD*
Generator Set) failure
- ----------------------------------------------------------------------------------------------
Performance degradation (e.g., TBD*
efficiency, output) (e.g., degradation of system efficiency and
output will not exceed [***] of rated values
at the end of [***] hours of operation)
- ----------------------------------------------------------------------------------------------
Non-fuel O&M ($/year up to first stack TBD*
replacement) at [***] kWh/year
- ----------------------------------------------------------------------------------------------
Product life with prescribed routine TBD*
maintenance (including stack (e.g., less than [***])
replacement) at more than [***] kWh/year
- ----------------------------------------------------------------------------------------------
</TABLE>
* SUPPLIER and DISTRIBUTOR will mutually agree to the specific values for
these areas no later than October 1, 1999 (e.g., based on TEU lab and field
testing).
Product ("Commercial Unit")
Performance Specifications
Note: SUPPLIER and DISTRIBUTOR recognize that these specifications may change
- -------------------------------------------------------------------------------
based on further analysis of residential load profiles and field testing. If
- -----------------------------------------------------------------------------
SUPPLIER and DISTRIBUTOR mutually agree to change the specifications set forth
- ------------------------------------------------------------------------------
below, SUPPLIER and DISTRIBUTOR agree to adjust the prices set forth in Schedule
- --------------------------------------------------------------------------------
C and the purchase volumes set forth in Schedule D.
- ---------------------------------------------------
Testing protocol and acceptance criteria:
- -----------------------------------------
On or before June 1, 2000, DISTRIBUTOR and SUPPLIER will agree on the
specific testing protocol and acceptance criteria for all Products purchased by
DISTRIBUTOR. The protocol and acceptance criteria will (a) incorporate the field
test results from the PCUs; and (b) address all aspects of Product system and
component performance that are expected to impact regulatory approvals and end-
user economics, including, but not limited to, useful life, output, reliability,
efficiency, operating environment requirements, power quality, load following
capability, and emissions. In the event that DISTRIBUTOR and SUPPLIER are unable
to agree on the testing protocol and/or acceptance criteria this Agreement will
terminate.
Packaging:
- ----------
Product package size and weight must be suitable for installation indoor or
outside of a typical single family residence within the Major Markets.
Certifications:
- ---------------
Commercial units, including packaging, must be compliant with all requisite
standards (e.g., UL, NFPA, AGA, FCC Class B, CE) within the Major Markets. To
the extent the installation site requires preparation to meet local codes, any
site improvements will be at the Customer's expense.
Interconnection:
- ----------------
Products will be capable of interconnection to the electrical system of a
typical single family residence; provided however that the Product will operate
isolated from the grid with the use of a transfer switch ("stand-alone
operation"). The transfer switch will, in the event that the Product fails or is
interrupted, transfer the household load from the Product back to the utility
grid within no more than one-tenth of a second.
Should it be determined that DISTRIBUTOR's Customers require an
interconnection scheme other than stand-alone operation (e.g., grid parallel),
DISTRIBUTOR and SUPPLIER will jointly set the requirements of the new
interconnection scheme. To the extent the new interconnection scheme results in
an increase in SUPPLIER's Product cost, SUPPLIER will adjust DISTRIBUTOR's
transfer price proportionately.
In the event that SUPPLIER offers Products with a heat recovery option and
such units require an interconnection scheme other than stand-alone operation,
DISTRIBUTOR and SUPPLIER will jointly set the requirements of the new
interconnection scheme. To the extent the new interconnection scheme results in
an increase in SUPPLIER's Product cost, SUPPLIER will adjust DISTRIBUTOR's
transfer price proportionately.
Installation:
- -------------
Products must be in compliance with any applicable installation
requirements within the Major Markets.
Documentation:
- --------------
Products must be shipped with sufficient documentation (e.g., installation
drawings, operating manuals, repair guides) to allow for start-up and Service by
individuals with a skill level comparable to a typical HVAC technician, after
such individual has completed the SUPPLIER training program or a training
program approved by SUPPLIER.
Products must be shipped with documentation sufficient for an average
homeowner to perform routine maintenance.
Products must be provided in strict accordance with samples, drawings,
and/or designs provided by SUPPLIER and approved in writing by SUPPLIER and
DISTRIBUTOR.
Technical Support:
- ------------------
SUPPLIER will make available by telephone to DISTRIBUTOR and its Customers
Product technical support during SUPPLIER's normal business hours. SUPPLIER
will also establish a 24-hour telephone number to accommodate emergency calls
from DISTRIBUTOR and its Customers.
Shipping:
- ---------
SUPPLIER will prepare all Products to allow for standard commercial
shipment (e.g., truck, rail, cargo ship) to Customer locations.
Monitoring & Diagnostics:
- -------------------------
Products will be designed to accommodate remote monitoring and diagnostics
(RM&D) equipment (e.g., modems, data collection/storage). RM&D equipment will
be provided, installed, and operated at DISTRIBUTOR's or its Customers' expense.
At a minimum, the Product control system will allow the RM&D equipment to
monitor the following parameters:
Current System Status
Output Power
Voltage
Current
Others - TBD*
Assumptions:
- ------------
Plug Power assumed the following in developing the specifications set forth
below:
(a) Natural gas line pressure at [***] of water or greater; and
(b) Average system usage of [***].
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Specification Product
- -------------------------------------------------------------------------------------------------
<S> <C>
kW output rating 7kW continuous, [***] operating design point, [***]
- -------------------------------------------------------------------------------------------------
Voltage/frequency [***]
- -------------------------------------------------------------------------------------------------
Operating design point efficiency (i.e., [***]
efficiency at 2kW output)
- -------------------------------------------------------------------------------------------------
Continuous capacity output efficiency [***]
(i.e., efficiency at 7kW output)
- -------------------------------------------------------------------------------------------------
Phase [***]
- -------------------------------------------------------------------------------------------------
Fuel capability [***]
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Specification Product
- -------------------------------------------------------------------------------------------------
<S> <C>
Allowable fuel contaminants Must be able to operate on [***]
For NG:
Sulfur ___ TBD*
Alkalis ___ TBD*
Water ___ TBD*
Nitrogen ___ TBD*
Non-Methane Hydrocarbons ____ TBD*
Methane ___ TBD*
For LPG: _______ TBD*
For Methanol: _______ TBD*
- -------------------------------------------------------------------------------------------------
System make up water requirements Must be able to operate on [***]
Iron (PPM maximum) ___ TBD*
Calcium (PPM maximum) ___ TBD*
Chlorine (PPM maximum) ____ TBD*
Particulate (PPM maximum) ___ TBD*
Other(s) ______ (PPM maximum) ____ TBD*
- -------------------------------------------------------------------------------------------------
Noise ____ dBa (TBD*) [***] meter for outdoor installations,
not to exceed [***]
____ dBa (TBD*) [***] meter for indoor installations,
not to exceed [***]
- ----------------------------------------------------------------------------------------------
Operating environment requirements Must be able to operate [***]
Humidity
maximum ____% TBD*
minimum ____% TBD*
Salt in Air
maximum ____% TBD*
minimum ____% TBD*
Particulate [***]
maximum ____% TBD*
minimum ____% TBD*
Other Cathode contaminant(s) [***]
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------
vapor)
maximum ____% TBD*
minimum ____% TBD*
- ----------------------------------------------------------------------------------------------
Emissions - TBD*
__ NOx (NG) ____/____ (maximum/target)
__ CO (NG) ____/____ (maximum/target)
__ NOx (LPG) ____/____ (maximum/target)
__ CO (LPG) ____/____ (maximum/target)
__ NOx (Methanol) ____/____ (maximum/target)
__ CO (Methanol) ____/____ (maximum/target)
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Specification Product
- ----------------------------------------------------------------------------------------------
<S> <C>
Ambient temperature range [***]
- ----------------------------------------------------------------------------------------------
Altitude [***]
- ----------------------------------------------------------------------------------------------
Power conditioning system [***]
- ----------------------------------------------------------------------------------------------
Overload [***] [***]
- ----------------------------------------------------------------------------------------------
Harmonics Harmonics at [***] continuous operation to
satisfy [***] for harmonic voltages. Harmonics
at [***], including [***]
- ----------------------------------------------------------------------------------------------
Power quality (isolated)
- ----------------------------------------------------------------------------------------------
Voltage, steady state (up to 7.0 kW [***]
continuous load)
- ----------------------------------------------------------------------------------------------
Voltage, transient (up to overload [***]
rating)
- ----------------------------------------------------------------------------------------------
Control [***]
- ----------------------------------------------------------------------------------------------
Communications [***] or similar as needed to establish
communications links
- ----------------------------------------------------------------------------------------------
Grid Connection Suitable for isolated operation [***]
- ----------------------------------------------------------------------------------------------
MTB stack replacement [***]
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Specification Product
- ----------------------------------------------------------------------------------------------
<S> <C>
MTB system (i.e., PEM Fuel Cell-Powered TBD*
Generator Set) failure [***]
- ----------------------------------------------------------------------------------------------
Performance degradation (e.g., TBD*
efficiency, output ) [***]
- ----------------------------------------------------------------------------------------------
Non-fuel O&M ($/year up to first stack TBD*
replacement) at [***] (e.g., [***]/year
Assumptions
-----------
Labor Hours: [***]
Labor Rate: [***]
Total Labor: [***]
Materials: [***]
- ----------------------------------------------------------------------------------------------
Product life with prescribed routine TBD*
maintenance (including stack [***]
replacement) at more than [***]
- ----------------------------------------------------------------------------------------------
</TABLE>
* SUPPLIER and DISTRIBUTOR will mutually agree to the specific values for
these areas no later than June 1, 2000 (e.g., based on PCU lab and field
testing).
SCHEDULE C
----------
PCU AND PRODUCT PRICES
<TABLE>
<CAPTION>
Pre-Commercial Units
------------------------------------------------------------------------------------------
SUPPLIER's
estimated Cumulative #
direct cost Price to DISTRIBUTOR of units
# of units per unit per unit (US$) purchased by
Lot # in Lot (US$) DISTRIBUTOR
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 485* [***] [***] 485
2 All units [***] ** greater than 485
purchased
after the
first 485
</TABLE>
* [***]
** The price per unit to DISTRIBUTOR for Lot #2 will be equal to
[***] and SUPPLIER will provide DISTRIBUTOR with a firm cost/price
quote no later than January 1, 2000.
<TABLE>
<CAPTION>
Products (Commercial Units)
--------------------------------------------------------------------------------------
SUPPLIER's
estimated Cumulative #
direct cost Price to of units
# of units per unit DISTRIBUTOR per purchased by
Lot # in Lot (US$) unit (US$) DISTRIBUTOR
--------------------------------------------------------------------------------------
<S> <C>
1 [***-- Note: all numbers have been omitted and filed separately
with the Securities and Exchange Commission pursuant to Rule 406
under the Securities Act.]
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
</TABLE>
Prices shown are for the Products as specified in Schedule B. Any modification
----------
to the Schedule B specifications requested by DISTRIBUTOR that result in a
----------
change to SUPPLIER'S direct cost will cause the price to DISTRIBUTOR to be
changed by an equal amount.
Prices for the Pre-Commercial Units as shown are firm (i.e., not subject to
change).
Product prices as shown are not firm. On April 1 of each year, beginning April
1, 2000, SUPPLIER will provide DISTRIBUTOR with a 3-year forecast of Product
prices for the period nine months hence (e.g., on April 1, 2000, SUPPLIER will
provide DISTRIBUTOR with Product prices for the 3-year period beginning January
1, 2001). The first year of each of SUPPLIER's forecast will be a firm price
commitment (i.e., in the forecast provided to DISTRIBUTOR on April 1, 2000,
SUPPLIER's Product prices for 2001 will be firm).
Prices are based upon cumulative quantity purchased (e.g., if DISTRIBUTOR
purchases [***] Product units in year 1, the price for the first [***] units is
[***] per unit, the price for the second [***] units is [***] per unit, and
the price for the first [***] units purchased in year 2 is [***] per unit).
On or before July 1, 2000, DISTRIBUTOR will provide SUPPLIER with a forecast of
DISTRIBUTOR's monthly purchases for the 12 months beginning January 1, 2001.
Each of the first 3 months of DISTRIBUTOR's forecast (i.e., January 1, 2001 to
March 31, 2001) will be a firm order (i.e., subject to change at SUPPLIER's sole
discretion). DISTRIBUTOR's forecast for the final 9 months of the forecast
period (i.e., April 1, 2001 to December 31, 2001) is for SUPPLIER's planning
purposes only. DISTRIBUTOR, at its sole discretion, may change the monthly
purchase forecast in any month in the final 9-month forecast period by any
amount.
On the first business day of each month beginning October 1, 2000, DISTRIBUTOR
will provide SUPPLIER with a 12-month rolling forecast of monthly purchases for
the period beginning 3 months hence. Each of the first 3 months of DISTRIBUTOR's
forecast will be a firm order. DISTRIBUTOR's forecast for the final 9 months of
each forecast period is for SUPPLIER'S planning purposes only. DISTRIBUTOR, at
its sole discretion, may change the monthly purchase forecast in any month in
the final 9-month forecast period by any amount.
Any Products that DISTRIBUTOR is obligated to purchase, but otherwise unable to
sell, may be held in SUPPLIER's inventory at the request of DISTRIBUTOR.
Electing to have SUPPLIER hold DISTRIBUTOR's inventory does not relieve
DISTRIBUTOR of its obligation to purchase any of DISTRIBUTOR's units held in
inventory. DISTRIBUTOR will reimburse SUPPLIER for its fully loaded inventory
carrying cost, including warehouse expenses, interest, and any inventory
carrying cost charged to SUPPLIER by SUPPLIER's vendors as a direct result of
DISTRIBUTOR's request for SUPPLIER to hold inventory.
On or before April 1, 2000, SUPPLIER will provide DISTRIBUTOR with a firm price
for the monthly inventory carrying charge for 2001. On or before August 1 of
each subsequent year, SUPPLIER will provide DISTRIBUTOR with a firm price for
the monthly inventory carrying charge for the upcoming year.
Prices to DISTRIBUTOR for Product and Pre-Commercial Unit replacement parts will
not exceed SUPPLIER's fully loaded actual cost plus [***]. DISTRIBUTOR will have
the right to audit SUPPLIER's financial records to the extent necessary to
verify compliance with this provision.
SCHEDULE D
----------
SALES COMMITMENTS
DISTRIBUTOR'S Global Sales Commitments are as follows:
<TABLE>
<CAPTION>
Calendar Total number of
year units
--------------- -----------------
<S> <C>
2001 [***]
2002 [***]
2003 [***]
</TABLE>
DISTRIBUTOR'S Major Market Sales Commitments are as follows:
<TABLE>
<CAPTION>
Total number of Total number of
Calendar units sold in units sold in
year U.S. and Canada Western Europe
----------- ------------------- --------------------
<S> <C> <C>
2001 [***] [***]
2002 [***] [***]
2003 [***] [***]
</TABLE>
Global Sales Commitments and Major Market Sales Commitments (collectively
"Commitments") as shown are expressed in 7kW equivalent units based on maximum
continuous output. If DISTRIBUTOR sells any units larger or smaller than 7kW,
the sales targets will be adjusted accordingly (e.g., DISTRIBUTOR can satisfy
its 2001 Global Sales Commitment with [***] units).
The Commitment for any 1-month period will be equal to [***] of the annual
Commitment.
DISTRIBUTOR's Global Sales Commitments and Major Market Sales Commitments
commence January 1, 2001, provided that SUPPLIER has designed and manufactured a
"lock in" system that meets the Product specifications in Schedule B by January
----------
1, 2000. To the extent SUPPLER has not designed and manufactured such lock-in
system by January 1, 2000, DISTRIBUTOR's Global Sales Commitments and Major
Market Sales Commitments will be deferred on a month-for-month basis (e.g., if
SUPPLIER completes design and manufacturing of the lock-in system on April 1,
2000, then DISTRIBUTOR'S "calendar year" 2001 Global Sales Commitments and Major
Market Sales Commitments will run from April 1, 2001 to March 31, 2002).
Global Sales Commitments
DISTRIBUTOR shall be deemed to have achieved the Global Sales Commitments if
DISTRIBUTOR achieves global minimum sales of at least [***] of the Global Sales
Commitment in each relevant 12-month period.
In the event DISTRIBUTOR's total sales in the Territory in "2001" (defined
herein as the 12-month period commencing 12 months after SUPPLIER completes
design and manufacturing of the lock-in system, but no earlier than January 1,
2001) are less than [***], but more than [***], of the "2001" Global Sales
Commitment, DISTRIBUTOR must achieve sales in "2002" (defined herein as the
12-month period after the completion of "2001") of not less than [***] of the
"2002" Global Sales Commitment, or SUPPLIER shall have the right to name
additional distributors in the Territory for "2003" (defined herein as the
12-month period after the completion of "2002").
In the event DISTRIBUTOR's total sales in "2001" are less than [***], but more
than [***], of the "2001" Global Sales Commitment, DISTRIBUTOR must achieve
sales in the first 6 months of "2002" of not less than [***] of the Global Sales
Commitment for the first 6 months of "2002", or SUPPLIER shall have the right to
name additional distributors in the Territory beginning in month 7 of "2002".
In the event that DISTRIBUTOR's total sales in "2001" are less than [***], but
more than [***], of the "2001" Global Sales Commitment, and DISTRIBUTOR achieves
sales in the first 6 months of "2002" of not less than [***] of the Global Sales
Commitment for the first 6 months of "2002", DISTRIBUTOR must also achieve sales
for the 12-month period from month 7, "2002" through month 6, "2003" of not less
than [***] of the Global Sales Commitment for such 12-month period, or SUPPLIER
shall have the right to name additional distributors in the Territory for the
last 6 months of "2003".
In the event that, during any 12-month period, DISTRIBUTOR's total sales are
less than [***] of the Global Sales Commitment for such period, SUPPLIER shall
have the right to terminate this Agreement.
Major Market Sales Commitments
DISTRIBUTOR shall be deemed to have achieved the Major Market Sales Commitments
if DISTRIBUTOR achieves sales of at least [***] of each Major Market Sales
Commitment in each relevant 12-month period.
In the event DISTRIBUTOR's sales in a "Major Market" (defined herein as
U.S./Canada, and Western Europe) in "2001" are less than [***], but more than
[***], of the "2001" Major Market Sales Commitment for such Major Market,
DISTRIBUTOR must achieve sales in "2002" in such Major Market of not less than
[***] of the Major Market Sales Commitment for such Major Market in "2002", or
SUPPLIER shall have the right to name additional distributors in that Major
Market for "2003".
In the event that DISTRIBUTOR's sales in either Major Market in any 12-month
period are less than [***] of the Major Market Sales Commitment for such Major
Market for such period, SUPPLIER shall have the right to name additional
distributors in that Major Market.
However, in the event that DISTRIBUTOR's total sales exceed [***] of the Global
Sales Commitment for "2001" or "2002", SUPPLIER shall not be allowed to name
additional distributors in either Major Market for the following year (the
"Extension") (e.g., if DISTRIBUTOR achieves greater than [***] of the Global
Sales Commitment for "2001", then SUPPLIER may not name additional distributors
to either Major Market in "2002", regardless of DISTRIBUTOR's sales in the Major
Markets in "2001"). This Extension shall apply only one time, such that if this
clause applies in the "2001", it shall not apply in "2002".
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
SCHEDULE E
----------
SUPPLIER'S INSURANCE
SUPPLIER shall maintain in effect at all times during the Term of this
Agreement products liability insurance as set forth on the following
certificate, with DISTRIBUTOR named as additional insured:
<TABLE>
<S> <C>
Marshall & Sterling THIS CERTIFICATE
Upstate Inc ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE
113 Saratoga Road HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND
Glenville, NY 12302 OR ALTER THE COVERAGE AFFORDED BY POLICIES BELOW
David P. Charnock COMPANIES AFFORDING COVERAGE
518-384-1100 518-384-0193
Company A Great Northern Insurance Company
Company B Pacific Indemnity
Plug Power LLC
968 Albany Shaker Road Company C First Rehabilitation Insurance
Latham NY 12110
Company D American Int'l Specialty Lines
</TABLE>
COVERAGES
THIS IS TO CERTIFY THAT THE POLICIES LISTED BELOW HAVE BEEN ISSUED TO THE
INSURED NAMED ABOVE FOR THE POLICY PERIOD INDCATED, NOTWITHSTANDING ANY
REQUIREMENT, TERM OR CONDITION OF ANY CONTACT OR OTHER DOCUMENT WITH RESPECT TO
WHICH THIS CERTIFICATE MAY BE ISSUED OR AMY PERTAIN, THE INSURANCE AFFORDED BY
THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND
CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HVAE BEEN REDUCED BY PAID
CLAIMS.
<TABLE>
<CAPTION>
Co TYPE OF INSURANCE POLICY NUMBER POLICY POLICY LIMITS
Ltr EFFECTIVE EXPIRATION
DATE DATE
<S> <C> <C> <C> <C> <C> <C>
A GENERAL LIABILITY 35365127CCG 06/27/98 06/27/99 GENERAL AGGREGATE $ 2,000,000
[_] COMMERCIAL GENERAL LIABILITY
[_][_] CLAIMS MADE [X] OCCUR PRODUCTS-COMMON COMP/AGG $ 2,000,000
[_] OWNERS AND CONTRACTORS
[_] PERSONAL AND ADV INJURY $ 1,000,000
[_]___________________________
[_] EACH OCCURRENCE $ 1,000,000
Fire DAMAGE $ INCLUDED
Med Exp $ 10,000
A AUTOMOBILE 35365127CCG 06/27/98 06/27/99 $ 1,000,000
LIABILITY SINGLE UNIT
[_] ANY AUTO
[_] ALL OWNED AUTOS BODILY INJURY $
[_]SCHEDULED AUTOS per person
[X] AUTOS
[X] NON-OWNED AUTOS BODILY INJURY $
[_]___________________________ per accident
[_]
PROPERTY DAMAGE $
GARAGE LIABILITY AUTO ONLY-EA ACCIDENT $
[_] ANY AUTO
[_]____________________________ OTHER THAN AUTO ONLY $
[_]
EACH ACCIDENT $
AGGREGATE $
D EXCESS LIABILITY 8189611 (BTE 08/01/98 08/01/98 EACH OCCURRENCE $ 25,000,000
[X] .UMBRELLA FORM ENERGY CO)
[_] OTHER THAN UMBRELLA FORM AGGREGATE $ 25,000,000
B WORLDWIDE COMPENSATION AND statutory limits
EMPLOYEE LIABILITY
71644855 06/27/98 06/27/99 EACH ACCIDENT $ 100,000
DISEASE POLICY LIMIT $ 500,000
THE PROTECTIONS AFFECTING [_]incl
EXECUTIVE OFFICERS ARE [_]exel disease-each employee $ 100,000
OTHER
A PROPERTY 35365127CCG 06/27/98 06/27/99 Limit $ 1,200,000
A TRANSPORTATION 35365127CCG 06/27/98 06/27/99 LIABILITY $ 500,000
</TABLE>
-22-
<PAGE>
SCHEDULE F
----------
COPIES OF TRADEMARK REGISTRATIONS
DISTRIBUTOR'S TRADEMARK [GENERAL ELECTRIC LOGO
APPEARS HERE]
SUPPLIER'S TRADEMARK [PLUG POWER LOGO
APPEARS HERE]
-23-
<PAGE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
EXHIBIT 10.14
Agreement No: 4633-ERTER-TR-99
Amount: $1,191,478
Type: Cost-Sharing
RESTATED AGREEMENT
This Restated Agreement dated this 26th day of June, 1997 by and between
the NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY ("NYSERDA"), a New
York public benefit corporation having its principal office and place of
business at Corporate Plaza West, 286 Washington Avenue Extension, Albany, New
York 12203-6399, and MECHANICAL TECHNOLOGY, INC., a New York corporation having
its principal office and place of business at 968 Albany-Shaker Road, Latham,
New York (the "Contractor").
WHEREAS, NYSERDA and the Contractor have previously worked together under
NYSERDA and MECHANICAL TECHNOLOGY, INC. Agreements 1791-ERER-ER-92, 4087-ERTER-
TR-95 and 4540-ERTER-TR-97 to support the development, demonstration and
commercialization of the Proton Exchange Membrane ("PEM") Fuel Cell (the
"Project");
WHEREAS, in an effort to streamline and consolidate all of the rights and
obligations under the aforementioned Project, NYSERDA and the Contractor desire
to terminate Agreements 1791-ERER-ER-92, 4087-ERTER-TR-95, and 4540-ERTER-TR-97
and have all of the rights and obligations of NYSERDA and the Contractor under
the aforementioned Agreements contained in this Agreement No. 4633-ERTER-TR-98;
and
WHEREAS, NYSERDA and the Contractor desire to continue to work together to
support the successful commercialization of the Project.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the parties do hereby agree as
follows:
Article I
Definitions
-----------
Section 1.01. Definition. Unless the context otherwise requires, the terms
----------
defined below shall have, for all purposes of this Agreement, the respective
meanings set forth below, the following definitions to be equally applicable to
both the singular and plural forms of any of the terms defined.
(a) General Definitions:
-------------------
Agreement: This Agreement and Exhibits A, B, C, and D hereto, all of which
---------
are made a part hereof as though herein set forth in full.
<PAGE>
Budget: The Budget set forth in Exhibit A hereto.
------
Contract Administration: NYSERDA's Director of Contract Management, Robert
-----------------------
G. Callender, or such other person who may be designated, in writing, by
NYSERDA.
Effective Date: The effective date of this Agreement shall be the date in
--------------
the first paragraph of page one, above.
Final Report: The Final Report required by the Statement of Work hereof.
------------
Person: An individual, a corporation, an association or partnership, an
------
organization, a business or a government or political subdivision thereof, or
any governmental agency or instrumentality.
Progress Reports: The Progress Reports required by the Statement of Work
----------------
hereof.
Statement of Work: The Statement of Work attached hereto as Exhibit. A.
-----------------
Subcontract: An agreement for the performance of Work by a Subcontractor,
-----------
including any purchase order for the procurement of permanent equipment or
expendable supplies in connection with the Work.
Subcontractor: A person who performs Work directly or indirectly for or on
-------------
behalf of the Contractor (and whether or not in privity of contract with the
Contractor) but not including any employees of the Contractor or the
Subcontractors.
Work: The Work described in the Exhibit A (including the procurement of
----
equipment and supplies in connection therewith) and the performance of all other
requirements imposed upon the Contractor under this Agreement.
(b) Data Rights and Patents Definitions:
-----------------------------------
Contract Data: Technical Data first produced in the performance of the
-------------
Agreement or Agreements numbered 1791-ERER-ER-92, 4087-ERTER-TR-95, or 4540-
ERTER-TR-97, or Technical Data actually delivered in connection with the
Agreement or Agreements numbered 1791-ERER-ER-92, 4087-ERTER-TP-95, or 4540-
ERTER-TR-97.
Practical Application: To manufacture in the case of a composition or
---------------------
product, to practice in the case of a process or method, or to operate in the
case of a machine or system, and under conditions which indicate that the
benefits of the invention are available to the public on reasonable terms.
Proprietary Data: Technical Data which embody trade secrets developed at
----------------
private
2
<PAGE>
expense, such as design procedures or techniques. chemical composition of
materials, or manufacturing methods, processes, or treatments, including minor
modifications thereof, provided that such data:
(i) are not generally known or available from other sources without
obligation concerning their confidentiality,
(ii) have not been made available by the owner to others without
obligation concerning its confidentiality; and
(iii) are not already available to NYSERDA without obligation
concerning their confidentiality.
Subject Invention: Any invention or discovery of the Contractor conceived
-----------------
or first actually reduced to practice in the course of or under this Agreement
or Agreements numbered 1791-ERER-ER-92, 4087-ERTER-TR-95 or 4540-ERTER-TR-97,
and includes any art, method, process, machine, manufacture, design, or
composition of matter, or any new and useful improvement thereof, or any variety
of plants, whether patented or unpatented, under the Patent Laws of the United
States of America or any foreign country.
Technical Data: Recorded information regardless of form or characteristic,
--------------
of a scientific or technical nature. It may, for example, document research,
experimental or developmental, or demonstration, or engineering work, or be
usable or used to define a design or process, or to procure, produce, support,
maintain, or operate material. The data may be graphic or pictorial delineations
in media such as drawings or photographs, text in specifications or related
performance or design type documents or computer software (including computer
software programs, computer software data bases, and computer software
documentation.). Examples of Technical Data include research and engineering
data, engineering drawings and associated lists, specifications, standards,
process sheets, manuals, technical reports, catalog item identification, and
related information. Technical Data as used herein does not include financial
reports, cost analyses, and other information incidental to contract
administration.
Unlimited Rights: Rights to use, duplicate, or disclose Technical Data, in
----------------
whole or in part, in any manner and for any purpose whatsoever, and to permit
others to do so.
(c) Payments to NYSERDA Definitions:
-------------------------------
PEM Fuel Cell: The Proton Exchange Membrane ("PEM") Fuel Cell is a
-------------
electrochemical device designed to convert hydrogen and oxygen to electricity
with high efficiency and is characterized by high power density in terms of
weight and size and as designed, developed, assembled and tested pursuant to
this Agreement.
3
<PAGE>
PEM Fuel Cell Stack: The PEM Fuel Cell Stack consists of multiple PEM fuel
-------------------
cells arranged in a layer manner to provide an integrated structure.
Product: The Product includes the PEM Fuel Cell and the PEM Fuel Stack,
-------
whether used individually or together and regardless of application.
New York State Manufacturer: Any manufacturer which provides (1) in excess
---------------------------
of 25% value added to the manufacture of the Product, or (2) provides in excess
of 75% value added for the assembly and R&D required for the manufacture of the
Product and/or (3) any manufacturer which provides in excess of 25% of value
added to the manufacture of a Subject Invention, or (4) provides in excess of
75% value added for the assembly and R&D required for manufacture of the Subject
Invention as developed in this Project, within the geographical boundaries of
the State of New York. Such value added shall be capable of being proven by an
audit conducted in accordance with generally accepted auditing standards. "Value
added" for manufacturing means any separable component of the Product or a
Subject Invention, paid for by the Contractor to others, for parts, components,
and services, all manufacturing costs, including but not limited to labor, labor
overhead, materials, and G&A, but excluding profit. "Value added" for assembly
and R&D means all assembly and R&D costs, including but not limited to assembly
and R&D labor, assembly and R&D labor overhead and general and administrative
services, excluding profit, assembly and R&D materials, and all manufactured
component costs used in the manufacturing process.
Sale: A sale or lease of a Product.
----
Sale Price: The Contractor's manufacturing cost of the Product, including
----------
the cost of all materials, direct labor, manufacturing overhead, and general and
administrative expenses, excluding returns, and allowances such as sales tax,
freight, commissions and insurance, if applicable, derived from a Sale.
Seller: The Contractor, or any franchisee, licensee or assignee thereof.
------
Article II
Performance of Work
-------------------
Section 2.01. Manner of Performance. Subject to the provisions of Article
---------------------
XII hereof, the Contractor shall perform all of the Work described in the
Statement of Work, or cause such Work to be performed in an efficient and
expeditious manner and in accordance with all of the terms and provisions of
this Agreement. The Contractor shall perform the Work in accordance with the
current professional standards and with the diligence and skill expected for the
performance of work of the type described in the Statement of Work. The
Contractor shall furnish such personnel and shall procure such materials,
machinery, supplies, tools, equipment and other items as may reasonably be
necessary or appropriate to perform the Work in accordance with this Agreement.
4
<PAGE>
Section 2.02. Project Personnel. It is understood and agreed that
-----------------
Mr. William Ernst shall serve as Project Director and as such shall have the
responsibility of the overall supervision and conduct of the Work on behalf of
the Contractor and that the persons described in the Statement of Work shall
serve in the capacities described therein. Any change of Project Director by the
Contractor shall be subject to the prior written approval of NYSERDA. Such
approval shall not be unreasonably withheld, and, in the event that notice of
approval or disapproval is not received by the Contractor within thirty days
after receipt of request for approval by NYSERDA, the requested change in
Project Director shall be considered approved.
Article III
Deliverables
------------
Section 3.01. Deliverables. All deliverables shall be provided in
------------
accordance with the Exhibit A Statement of Work.
Article IV
Compensation
------------
Section 4.01. Cost-Sharing. It is understood and agreed that NYSERDA and
------------
the Contractor are sharing the costs for the Work to be performed. In
consideration for this Agreement and as full compensation for NYSERDA's share of
the costs for the performance of all Work, and in respect of all other direct
and indirect costs, charges or expenses incurred in connection therewith,
NYSERDA shall pay to the Contractor a maximum amount of $1,191,478 for the cost
elements identified in the Budget to be funded with NYSERDA funds, subject to
the provisions and restrictions contained herein. Such amount shall be paid only
to the extent that costs are incurred by the Contractor in performance of the
Work in accordance with the provisions of this Agreement, the Budget and the
following:
(a) Staff Charges: The Contractor shall be compensated for the services
-------------
performed by its employees under the terms of this Agreement at the employee's
actual wage rate. In the event that any of the Contractor's rates are reduced to
the benefit of any client of the Contractor as a result of any audit or for any
other reason, the Contractor shall so notify NYSERDA and the appropriate
reductions shall be made to the rates utilized hereunder.
(b) Direct Charges: The Contractor shall be reimbursed for reasonable and
--------------
necessary actual direct costs incurred (e.g., equipment, supplies, travel and
other costs directly associated with the performance of the Agreement) to the
extent required in the performance of the Work in accordance with the provisions
of the Budget. Travel, lodging, meals and
5
<PAGE>
incidental expenses shall be reimbursed for reasonable and necessary costs
incurred. Costs should generally not exceed the daily per diem rates, published
in the Federal Travel Regulations. Reimbursement for the use of personal
vehicles shall be limited to the Internal Revenue Service business standard
mileage rate.
(c) Indirect Costs: The Contractor shall he reimbursed for fringe
--------------
benefits, overhead, general and administrative (G&A), and other indirect costs
and profit included in the Budget at such rates as the Contractor may
periodically calculate, consistent with appropriate federal guidelines or
generally accepted accounting principles.
(d) Remaining Funds: NYSERDA and the Contractor agree that the cost to
---------------
complete all of the Work under this Agreement is $1,191,478. NYSERDA and the
Contractor agree that the Contractor has completed Work under the Project and
has been reimbursed by NYSERDA. NYSERDA and the Contractor agree that $317,633
is available to complete the Work under this Agreement.
Section 4.02. Title to Equipment. Title shall vest in the Contractor to all
------------------
equipment purchased hereunder.
Section 4.03. Progress Payments. The Contractor may submit invoices for
-----------------
progress payment no more than once each month or no less than once each calendar
quarter for Work performed during such period. Invoices shall be addressed to
NYSERDA, "Attention: Accounts Payable." Such invoices shall make reference to
the Agreement number shown on the upper right hand corner of page one of the
Agreement. Invoices shall set forth total project costs incurred. These shall be
broken down into NYSERDA's Funding share and into the Cost-Share and other
Cofunding share, and they shall be in a format consistent with the cost
categories set forth in the Budget. Invoices shall provide reasonable
documentation for the above to provide evidence of costs incurred, including:
(a) Staff charges: for each employee, the name, title, number of hours
worked, hourly rate and labor extension;
(b) Direct charges: all direct costs shall be itemized on the invoice and
supported by documentation, such as vendor invoices, travel vouchers or other
documentation; and
(c) Indirect charges: indirect cost rates and method by which rates are
applied.
The Contractor shall be notified by NYSERDA in accordance with Section
5.04.4 (b)(2) of NYSERDA's Prompt Payment Policy Statement, attached hereto as
Exhibit D, of any such information or documentation which the Contractor did not
include with such invoice.
In accordance with and subject to the provisions of such Exhibit D, NYSERDA
shall pay to the Contractor, within the prescribed time after receipt of an
invoice for a progress
6
<PAGE>
payment, 90% of NYSERDA's share of the amount so requested, unless NYSERDA
should determine that any such payment or any part thereof is otherwise not
properly payable pursuant to the terms of the Agreement or the Budget.
Section 4.04. Final Payment. Upon final acceptance by NYSERDA of the Final
-------------
Report and all other deliverables contained in Exhibit A, Statement of Work,
pursuant to Section 6.02 hereof, the Contractor shall submit an invoice for
final payment with respect to the Work, together with such supporting
information and documentation as, and in such form as, NYSERDA may require. An
invoice for final payment shall include, in addition to the material required
pursuant to Section 4.03 hereof, a statement as to whether any invention or
patentable devices have resulted from the performance of the Work. All invoices
for final payment hereunder must, under any and all circumstances, be received
by NYSERDA prior to September 30, 1998. In accordance with and subject to the
provisions of NYSERDA's Prompt Payment Policy Statement, attached hereto as
Exhibit D, NYSERDA shall pay to the Contractor within the prescribed time after
receipt of such invoice for final payment, the total amount payable pursuant to
Section 4.01 hereof, less all progress payments previously made to the
Contractor with respect thereto and subject to the maximum commitment of
$1,191,478 set forth in Section 4.07 hereof.
Section 4.05. Release by the Contractor. The acceptance by the Contractor
-------------------------
of final payment shall release NYSERDA from all claims and liability that the
Contractor, its representatives and assigns might otherwise have relating to
this Agreement.
Section 4.06. Maintenance of Records. The Contractor shall keep, maintain,
----------------------
and preserve at its principal office throughout the term of the Agreement and
for a period of three years after acceptance of the Work, full and detailed
books, accounts, and records pertaining to the performance of the Agreement,
including without limitation, all bills, invoices, payrolls, subcontracting
efforts and other data evidencing, or in any material way related to, the direct
and indirect costs and expenses incurred by the Contractor in the course of such
performance. Further, the Contractor shall keep, maintain, and preserve at its
principal office until such time as the Contractor's payment obligations to
NYSERDA pursuant to Section 8.03 of the Agreement have been met, full and
detailed books, accounts, and records in connection with Sales, and shall
require licensees to maintain records of Sales.
Section 4.07. Maximum Commitment. The maximum aggregate amount payable by
------------------
NYSERDA to the Contractor hereunder is $1,191,478. NYSERDA shall not be liable
for any costs or expenses in excess of such amount incurred by the Contractor in
the performance and completion of the Work.
Section 4.08. Audit. NYSERDA shall have the right from time to time and at
-----
all reasonable times during the term of the Agreement and such period thereafter
to inspect and audit any and all books, accounts, and records at the office or
offices of the Contractor where they are then being kept, maintained and
preserved pursuant to Section 4.06 hereof. Any
7
<PAGE>
payment made under the Agreement shall be subject to retroactive reduction for
amounts included therein which are found by NYSERDA on the basis of any audit of
the Contractor by an agency of the United States, State of New York or NYSERDA
not to constitute an allowable charge or cost hereunder. Further, the Contractor
shall provide to NYSERDA, on a reasonable basis, access to its books and records
and those of any parent, subsidiary, affiliate, franchisee, licensee, or
assignee to assure compliance with the payment provisions contained in Section
8.03 of the Agreement.
Article V
Assignments, Subcontracts and Purchase Orders
---------------------------------------------
Section 5.01. General Restrictions. Except as specifically provided
--------------------
otherwise in this Article, the assignment, transfer, conveyance, subcontracting
or other disposal of this Agreement or any of the Contractor's rights,
obligations, interests or responsibilities hereunder, in whole or in part,
without the express consent in writing of NYSERDA shall be void and of no effect
as to NYSERDA. Such consent shall not be unreasonably withheld, and, in the
event that notice of approval or disapproval is not received by the Contractor
within thirty days of receipt of the request for approval, the assignment,
transfer, conveyance, subcontracting or other disposal of this Agreement or any
of the Contractor's rights, obligations, interests, or responsibilities
hereunder. in whole or in part, shall be considered approved. In the event that
NYSERDA requires additional time for considering approval, NYSERDA shall notify
the Contractor within thirty days of receipt of the request for approval that
additional time is required and shall specify the additional amount of time
necessary up to sixty (60) days.
Section 5.02. Subcontract Procedures. Without relieving it of, or in any
----------------------
way limiting, its obligations to NYSERDA under this Agreement, the Contractor
may enter into Subcontracts for the performance of Work or for the purchase of
materials or equipment. Except for a subcontractor or supplier specified in a
team arrangement with the Contractor in the Contractor's original proposal, and
except for any subcontract or order for equipment, supplies or materials from a
single subcontractor or supplier totaling under $10.000, the Contractor shall
select all subcontractors or suppliers through a process of competitive bidding
or multi-source price review. A team arrangement is one where a subcontractor or
supplier specified in the Contractor's proposal is performing a substantial
portion of the Work and is making a substantial contribution to the management
and/or design of the Project. In the event that a competitive bidding or multi-
source price review is not feasible, the Contractor shall document an
explanation for, and justification of, a sole source selection.
The Contractor shall document the process by which a subcontractor or
supplier is selected by making a record summarizing the nature and scope of the
work, equipment, supplies or materials sought, the name of each person or
organization submitting, or requested to submit, a bid or proposal, the price or
fee bid, and the basis for selection of the
8
<PAGE>
subcontractor or supplier. An explanation for, and justification of, a sole
source selection must identify why the work, equipment, supplies or materials
involved are obtainable from or require a subcontractor with unique or
exceptionally scarce qualifications or experience, specialized equipment, or
facilities not readily available from other sources, or patents, copyrights, or
proprietary data.
All Subcontracts shall contain provisions comparable to those set forth in
this Agreement applicable to a subcontractor or supplier, and those set forth in
Exhibit B to the extent required by law, and all other provisions now or
hereafter required by law to be contained therein.
The Contractor shall submit to NYSERDA's Contract Administrator for review
and written approval any subcontract(s) specified in the Statement of Work as
requiring NYSERDA approval. The Contractor shall submit to NYSERDA a copy of all
fully executed subcontracts and purchase orders that total greater than $10,000.
Section 5.03. Performance. The Contractor shall promptly and diligently
-----------
comply with its obligations under each Subcontract and shall take no action
which would impair its rights thereunder. The Contractor shall not assign,
cancel or terminate any Subcontract without the prior written approval of the
Contract Administrator as long as this Agreement remains in effect. Such
approval shall not be unreasonably withheld and, in the event that notice of
approval or disapproval is not received by the Contractor within thirty days
after receipt of request for approval by NYSERDA, the requested assignment,
cancellation, or termination of the Subcontract shall be considered approved by
NYSERDA. In the event that NYSERDA requires additional time for considering
approval, NYSERDA shall notify the Contractor within thirty days of receipt of
the request for approval that additional time is required and shall specify the
additional amount of time necessary up to sixty (60) days.
Section 5.04. Assignment to Plug Power, L.L.C. NYSERDA hereby expressly
-------------------------------
consents, in writing, to the assignment of this Agreement, NYSERDA Agreements
1791-ERER-ER-92, 4087-ERTER-TR-95, and 4540-ERTER-ER-97, as modified and
restated by this Agreement, and any and all rights, title, interests, duties,
liabilities and obligations in connection therewith, to Plug Power, L.L.C.
NYSERDA agrees to take any and all action requested by the Contractor or Plug
Power, L.L.C., to effect such transfer as a matter of law.
Article VI
Schedule: Acceptance of Work
----------------------------
Section 6.01. Schedule. The Work shall be performed as expeditiously as
--------
possible in conformity with the schedule requirements contained herein and in
the Statement of Work. The draft and final versions of the Final Report shall be
submitted by the dates specified in the Exhibit A Schedule. It is understood and
agreed that the delivery of the draft and final versions
9
<PAGE>
of such reports by the Contractor shall occur in a timely manner and in
accordance with the requirements of the Exhibit A Schedule.
Section 6.02. Acceptance of Work. The completion of the Work shall be
------------------
subject to acceptance by NYSERDA in writing of the Final Report and all other
deliverables as defined in Exhibit A, Statement of Work.
Article VII
Force Majeure
-------------
Section 7.0.1. Force Majeure. Neither party hereto shall be liable for any
-------------
failure or delay in the performance of its respective obligations hereunder if
and to the extent that such delay or failure is due to a cause or circumstance
beyond the reasonable control of such party, including, without limitation, acts
of God or the public enemy, expropriation or confiscation of land or facilities,
compliance with any law, order or request of any Federal, State, municipal or
local governmental authority, acts of war, rebellion or sabotage or damage
resulting therefrom, fires, floods, storms, explosions, accidents, riots,
strikes, or the delay or failure to perform by any Subcontractor by reason of
any cause or circumstance beyond the reasonable control of such Subcontractor.
Article VIII
Technical Data: Patents- Payments to NYSERDA
--------------------------------------------
Section 8.01. Rights in Technical Data
------------------------
(a) Technical Data: Rights in Technical Data shall be allocated as follows:
(1) NYSERDA shall have:
(i) rights in Contract Data and Proprietary Data in order to exercise
license rights, as provided in paragraph (a)(2)(iii) below; and
(ii) no rights under this Agreement in any Technical Data which are
not Contract Data.
(2) The Contractor shall have:
(i) unlimited rights in all Technical Data, Contract Data and
Proprietary Data subject to paragraph (iii) below;
(ii) the right to withhold Proprietary Data except as otherwise
provided in paragraph (iii) below; and
10
<PAGE>
(iii) the right to make, use and sell the Product. In the event the
Contractor fails to make, use, or sell any Subject Invention
within 10 years from the Contractor's receipt of Final Payment as
described in Section 4.04 hereof, so that the benefits of such
Subject Invention are available to the public and after written
notice to the Contractor and a period of not less than six months
in which the parties shall negotiate in good faith in order to
resolve any disputes, NYSERDA shall be granted a royalty-free,
non-exclusive, worldwide license sufficient in scope to allow
NYSERDA to make, use or sell the Subject Invention and to allow
others to do so. NYSERDA shall keep any Proprietary Data
concerning such Subject Invention confidential, and may disclose
such Proprietary Data to its sublicensees who have agreed to keep
such Proprietary Data confidential.
The Contractor agrees that to the extent it receives or is given access to
Proprietary Data or other technical, business or financial data in the form of
recorded information from NYSERDA or a NYSERDA contractor or subcontractor, the
Contractor shall treat such data in accordance with any restrictive legend
contained thereon, unless another use is specifically authorized by prior
written approval of the Contract Administrator.
Section 8.02. Patents.
-------
(a) The Contractor retains the entire right, title and interest throughout
the world in each Subject Invention of the Contractor conceived or first
actually reduced to practice in the performance of the Work under the Agreement;
except, that with respect to any Subject Invention in which the Contractor
elects to retain title, NYSERDA shall have a non-exclusive, non-transferrable,
irrevocable, paid-up license for itself, the State of New York and all political
subdivisions and other instrumentalities of the State of New York, to practice
or have practiced for or on their behalf the Subject Invention throughout the
world, exclusively for their own use of the Subject Invention.
(b) Effective on the date of this Agreement, the Contractor shall submit to
NYSERDA, not less frequently than annually, written reports which indicate the
status of utilization of Subject Inventions. The reports shall include
information regarding the status of development, date of first commercial sale
or use, and gross royalties received by the Contractor. Such report shall be
furnished to NYSERDA not later than February 1 following the calendar year
covered by the report. The Contractor may include the information required by
this Section in the Annual Report required by Section 8.03 of this Agreement.
Section 8.03. Payments to NYSERDA.
--------------------
(a)
(1) When a Sale is made by a Seller when the Seller is a New York
State Manufacturer: .5% of the Sale Price;
The Contractor's obligation to make payments to NYSERDA under
this subparagraph (1) shall extend for a period of fifteen (15)
years or until the Contractor has paid NYSERDA $1,200,000,
whichever occurs first, commencing with the date of the filing of
the Fiscal Report with NYSERDA.
(2) When a Sale is made by a Seller when the Seller is not a New York
State Manufacturer: 3% of the Sale Price.
The Contractor's obligation to make payments to NYSERDA under
this subparagraph (2) shall extend for a period of ten (10) years
or until the Contractor has paid NYSERDA $2,400,000, whichever
occurs first, commencing with the date of the filing of the Final
Report with NYSERDA. In the event the Contractor is obligated to
make payments in accordance with the requirements of this
subparagraph, any payments made to NYSERDA as a result of the
sale of the Product pursuant to the conditions of subparagraph
(1) hereof shall be applied to the Contractor's revised maximum
payment obligation to NYSERDA of $2,400,000.
Also, after the fifteen (15) year payment period or dollar cap under
subparagraph (1) has been met of the ten (10) year payment period or dollar cap
under subparagraph (2) has been met, whichever obligation occurs first, the
Contractor's obligation to make payments to NYSERDA shall extend for another
period of ten (10) years and the Contractor shall make payments to NYSERDA of
.1% of the Sale Price for any Sale made by any Seller if the Contractor's annual
net sales for that year exceed $1,000,000,000.
All payments due pursuant to this Section 8.03 shall be payable in annual
installments and shall be paid by the first day of March in the calendar year
immediately following the year during which the Contractor receives revenues as
described above (the "Due Date") and such annual installments to NYSERDA shall
not exceed $200,000, in the aggregate, for any given year. Any payment not
received by the applicable Due Date shall be deemed delinquent. A delinquent
payment shall be made with interest with such interest computed commencing with
the Due Date of such payment. The interest rate payable shall be the "Prime
Rate" existing as of the due date of such payment plus five (5) percentage
points. Such interest shall be compounded monthly.
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
11
<PAGE>
amounts:
(b) Annual Reports. The Contractor shall provide NYSERDA an annual report
--------------
detailing, by manufacturer, the number of items sold or leased, or the payment
or other
12
<PAGE>
receipts received, and the resultant amount earned by, and paid to, NYSERDA in
accordance with paragraph (a) hereof. Such report shall be furnished to NYSERDA
not later than February 1 following the calendar year covered by the report. The
Contractor's obligation to provide Annual Reports shall commence on February 1
of the calendar year following either the Contractor's receipt of Final Payment
pursuant to Section 4.04 hereto, or upon the first Sale, whichever event occurs
first. In the event that, for a period of five consecutive years, the annual
reports indicate that no Sales are made and no payment is due to NYSERDA, the
Contractor may cease submittal of annual reports. If, however, Sales are made in
subsequent years, the Contractor's obligation to submit annual reports shall
resume.
(c) Licensing or Franchise Agreements. The Contractor shall not enter into
---------------------------------
any agreement with any party with respect to the licensing, franchising, or
assignment of rights in the Product or any Subject Invention which contains
provisions inconsistent with the Contractor's obligation as set forth in this
Section. The Contractor shall provide copies of any proposed licensing or
franchise agreements to NYSERDA and shall not execute any such agreements
without the prior written consent of NYSERDA. Such consent shall not be
unreasonably withheld, and, in the event that notice of consent or disapproval
is not received by the Contractor within thirty days after receipt of request
for approval by NYSERDA, such licensing or franchise agreement shall be
considered approved.
Article IX
Warranties and Guarantees
-------------------------
Section 9.01. Warranties and Guarantees. The Contractor warrants and
-------------------------
guarantees that:
(a) it is financially and technically qualified to perform the Work;
(b) it is familiar with and will comply with all general and special
Federal, State, municipal and local laws, ordinances and regulations, if any,
that may in any way affect the performance of this Agreement;
(c) the design, supervision and workmanship furnished with respect to
performance of the Work shall be in accordance with sound and currently accepted
scientific standards and engineering practices;
(d) all materials, equipment and workmanship furnished by it and by
Subcontractors in performance of the Work or any portion thereof shall be free
of defects in design, material and workmanship, and all such materials and
equipment shall be of first-class quality, shall conform with all applicable
codes, specifications, standards and ordinances and shall have service lives and
maintenance characteristics suitable for their intended purposes in accordance
with sound and currently accepted scientific standards and engineering
practices;
13
<PAGE>
(e) neither the Contractor nor any of its employees, agents,
representatives or servants has actual knowledge of any patent issued under the
laws of the United States or any other matter which could constitute a basis for
any claim that the performance of the Work or any part thereof infringes any
patent or otherwise interferes with any other right of any Person;
(f) there are no existing undisclosed or threatened legal actions, claims,
or encumbrances, or liabilities that may adversely affect the Work or NYSERDA's
rights hereunder; and
(g) it has no actual knowledge that any information or document or
statement furnished by the Contractor in connection with this Agreement contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statement not misleading, and that all facts have been
disclosed that would materially adversely affect the Work.
Article X
Indemnification
---------------
Section 10.01. Indemnification. The Contractor shall protect, indemnify and
---------------
hold harmless NYSERDA and the State of New York from and against all
liabilities, losses, claims, damages, judgments, penalties, causes of action,
costs and expenses (including, without limitation, attorneys' fees and expenses)
imposed upon or incurred by or asserted against NYSERDA or the State of New York
resulting from, arising out of or relating to the performance of this Agreement.
The obligations of the Contractor under this Article shall survive any
expiration or termination of this Agreement, and shall not be limited by any
enumeration herein of required insurance coverage.
Article XI
Insurance
---------
Section 11.01. Maintenance of Insurance Policy Provisions. The Contractor,
------------------------------------------
at no additional cost to NYSERDA, shall maintain or cause to be maintained
throughout the term of this Agreement, insurance of the types and in the amounts
specified in the Section hereof entitled Types of Insurance. All such insurance
shall be evidenced by insurance policies, each of which shall:
(a) name or be endorsed to cover NYSERDA, the State of New York and the
Contractor as insureds, as their respective interests may appear;
(b) provide that such policy may not be cancelled or modified until at
least 30 days after receipt by NYSERDA of written notice thereof; and
14
<PAGE>
(c) be reasonably satisfactory to NYSERDA in all other respects.
Section 11.02. Types of Insurance. The types and amounts of insurance
------------------
required to be maintained under this Article are as follows:
(a) Commercial general liability insurance for bodily injury liability,
including death, and property damage liability, incurred in connection with the
performance of this Agreement, with minimum limits of $1,000,000 in respect of
claims arising out of personal injury or sickness or death of any one person,
$1,000,000 in respect of claims arising out of personal injury, sickness or
death in any one accident or disaster, and $1,000,000 in respect of claims
arising out of property damage in any one accident or disaster;
(b) Commercial automobile liability insurance in respect of motor vehicles
owned, licensed or hired by the Contractor and the Subcontractors for bodily
injury liability, including death and property damage, incurred in connection
with the performance of this Agreement, with minimum limits of $500,000 in
respect of claims arising out of personal injury, or sickness or death of any
one person, $1,000,000 in respect of claims arising out of personal injury,
sickness or death in any one accident or disaster, and $500,000 in respect of
claims arising out of property damage in any one accident or disaster; and
(c) Upon commencement of marketing of the Product, product liability
insurance for bodily injury liability, including death, and property damage
liability, arising out or the use of the Product with minimum limits of
$1,000,000 in respect of claims arising out of personal injury or sickness or
death of any one person, $1,000,000 in respect of claims arising out of personal
injury, sickness or death in any one accident or disaster, and $1,000,000 in
respect of claims arising out of property damage in any one accident or
disaster. Product liability insurance naming the NYSERDA and State of New York
as additional insureds required under This Agreement shall remain in effect for
as long as the payment obligation pursuant to Section 8.03 of this Agreement is
in effect.
Section 11.03. Delivery of Policies; Insurance Certificates. Prior to
--------------------------------------------
commencing the Work, the Contractor shall deliver to NYSERDA certificates of
insurance issued by the respective insurers, indicating the Agreement number
thereon, evidencing the insurance required by Sections 11.02 (a) and (b) hereof
and bearing notations evidencing the payment of the premiums thereon or
accompanied by other evidence of such payment satisfactory to NYSERDA. Upon
commencement of marketing of the Product, the Contractor shall deliver to
NYSERDA certificates of insurance issued by the respective insurers, indicating
the Agreement number thereon, evidencing the insurance required by Section 11.02
(c) hereof and bearing notations evidencing the payment of the premiums thereon
or accompanied by other evidence of such payment satisfactory to NYSERDA. In the
event any policy furnished or carried pursuant to this Article will expire on a
date prior to acceptance of the Work by NYSERDA pursuant to the section hereof
entitled Acceptance of Work, the Contractor, not less than 15 days prior to such
expiration date, shall deliver to NYSERDA certificates of
15
<PAGE>
insurance evidencing the renewal of such policies, and the Contractor shall
promptly pay all premiums thereon due. In the event of threatened legal action,
claims, encumbrances, or liabilities that may affect NYSERDA hereunder, or if
deemed necessary by NYSERDA due to events rendering a review necessary, upon
request the Contractor shall deliver to NYSERDA a certified copy of each policy.
Article XII
Stop Work Order; Termination
----------------------------
Section 12.01. Stop Work Order.
---------------
(a) NYSERDA may at any time, by written Order to the Contractor, require
the Contractor to stop all or any part of the Work called for by this Agreement
for a period of up to 90 days after the Stop Work Order is delivered to the
Contractor, and for any further period to which the parties may agree. Any such
order shall be specifically identified as a Stop Work Order issued pursuant to
this Section. Upon receipt of Such an Order, the Contractor shall forthwith
comply with its terms and take all reasonable steps to minimize the incurrence
of costs allocable to the Work covered by the Order during the period of work
stoppage consistent with public health and safety. Within a period of 90 days
after a Stop Work Order is delivered to the Contractor, or within any extension
of that period to which the parties shall have agreed, NYSERDA shall either:
(i) by written notice to the Contractor, cancel the Stop Work Order,
which shall be effective as provided in such cancellation notice,
or if not specified therein, upon receipt by the Contractor, or
(ii) terminate the Work covered by such order as provided in the
Termination Section of this Agreement.
(b) If a Stop Work Order issued under this Section is cancelled or the
period of the Order or any extension thereof expires, the Contractor shall
resume Work. An equitable adjustment shall be made in the delivery schedule, the
estimated cost, the fee, if any, or a combination thereof, and in any other
provisions of the Agreement that may be affected, and the Agreement shall be
modified in writing accordingly, if:
(i) the Stop Work Order results in an increase in the time required
for, or in the Contractor's cost properly allocable to, the
performance of any part of this Agreement, and
(ii) the Contractor asserts a claim for such adjustments within 30
days after the end of the period of Work stoppage; provided that,
if NYSERDA decides the facts justify such action, NYSERDA may
receive and act
16
<PAGE>
upon any such claim asserted at any time prior to final payment
under this Agreement.
(c) If a Stop Work Order is not cancelled and the Work covered by such
Order is terminated, the reasonable costs resulting from the Stop Work Order
shall be allowed by equitable adjustment or otherwise.
(d) Notwithstanding the provisions of this Section 12.01, the maximum
amount payable by NYSERDA to the Contractor pursuant to this Section 12.01 shall
not be increased or deemed to be increased except by specific written amendment
hereto.
Section 12.02. Termination.
-----------
(a) This Agreement may be terminated by NYSERDA at any time during the term
of this Agreement with or without cause, upon 30 days prior written notice to
the Contractor. In such event, compensation shall be paid to the Contractor for
Work performed and expenses incurred prior to the effective date of termination
in accordance with the provisions of the Article hereof entitled Compensation
and in reimbursement of any amounts required to be paid by the Contractor
pursuant to Subcontracts; provided, however, that upon receipt of any such
notice of termination, the Contractor shall cease the performance of Work, shall
make no further commitments with respect thereto and shall reduce insofar as
possible the amount of outstanding commitments (including, to the extent
requested by NYSERDA, through termination of subcontracts containing provisions
therefor). Articles VIII, IX, and X shall survive any termination of this
Agreement, and Article XVI shall survive until the payment obligations pursuant
to Article VIII have been met.
(b) In the event of termination, the Contractor's payment obligations set
forth in Section 8.03 of the Agreement shall be adjusted as of the effective
date of termination, with such payment obligations being calculated as follows:
Total NYSERDA funds
actually paid to
the Contractor X Payments defined
- ---------------------------------------- in Section 8.03 of the
NYSERDA total maximum Agreement
commitment set forth
in Section 4.07 of
the Agreement
(c) Nothing in this Article shall preclude the Contractor from continuing
to carry out the Work called for by the Agreement after receipt of a Stop Work
Order or termination notice at its own election, provided that, if the
Contractor so elects, (i) any such continuing Work after receipt of the Stop
Work Order or termination notice shall be deemed not to be Work-pursuant to the
Agreement and (ii) NYSERDA shall have no liability to the Contractor for any
17
<PAGE>
costs of the Work continuing after receipt of the Stop Work Order or termination
notice.
Article XIII
Independent Contractor
----------------------
Section 13.01. Independent Contractor. The status of the Contractor under
----------------------
this Agreement shall be that of an independent contractor and not that of an
agent, and in accordance with such status, the Contractor, the Subcontractors,
and their respective officers, agents, employees, representatives and servants
shall at all times during the term of this Agreement conduct themselves in a
manner consistent with such status and by reason of this Agreement shall neither
hold themselves out as, nor claim to be acting in the capacity of, officers,
employees, agents, representatives or servants of NYSERDA nor make any claim,
demand or application for any right or privilege applicable to NYSERDA,
including, without limitation, rights or privileges derived from workers'
compensation coverage, unemployment insurance benefits, social security coverage
and retirement membership or credit.
Article XIV
Compliance with Certain Laws
----------------------------
Section 14.01. Laws of the State of New York. The Contractor shall comply
-----------------------------
with all of the requirements set forth in Exhibit B hereto.
Section 14.02. All Legal Provisions Deemed Included. It is the intent and
------------------------------------
understanding of the Contractor and NYSERDA that each and every provision of law
required by the laws of the State of New York to be contained in this Agreement
shall be contained herein, and if, through mistake, oversight or otherwise, any
such provision is not contained herein, or is not contained herein in correct
form, this Agreement shall, upon the application of either NYSERDA or the
Contractor, promptly be amended so as to comply strictly with the laws of the
State of New York with respect to the inclusion in this Agreement of all such
provisions.
Section 14.03. Other Legal Requirements. The references to particular laws
------------------------
of the State of New York in this Article, in Exhibit B and elsewhere in this
Agreement are not intended to be exclusive and nothing contained in such
Article, Exhibit and Agreement shall be deemed to modify the obligations of the
Contractor to comply with all legal requirements.
Article XV
Notices, Entire Agreement, Amendment, Counterparts
--------------------------------------------------
Section 15.01. Notices. All notices, requests, consents, approvals and
-------
other
18
<PAGE>
communications which may or are required to be given by either party to the
other under this Agreement shall be deemed to have been sufficiently given for
all purposes hereunder when delivered or mailed by registered or certified mail,
postage prepaid, return receipt requested, (i) if to NYSERDA, at Corporate Plaza
West, 286 Washington Avenue Extension, Albany, New York 12203-6399 or at such
other address as NYSERDA shall have furnished to the Contractor in writing, and
(ii) if to the Contractor, at 968 Albany-Shaker Road, Latham, New York
12110-1487, or such other address as the Contractor shall have furnished to
NYSERDA in writing.
Section 15.02. Entire Agreement: Amendment. This Agreement embodies the
---------------------------
entire agreement and understanding between NYSERDA and the Contractor and
supersedes all prior agreements and understandings relating to the subject
matter hereof. Except as otherwise expressly provided for herein, this Agreement
may be changed, waived, discharged or terminated only by an instrument in
writing, signed by the party against which enforcement of such change, waiver,
discharge or termination is sought.
Section 15.03. Counterparts. This Agreement may be executed in counterparts
------------
each of which shall be deemed an original, but all of which taken together will
constitute one and the same instrument.
Article XVI
Business Reorganizations
------------------------
Section 16.01. Business Reorganizations. In the event the Contractor
------------------------
proposes to consolidate or merge into or with another corporation or entity, or
to sell or dispose of all or a majority of the assets of the Contractor, or to
otherwise undertake a reorganization which alters or changes the rights of
NYSERDA as provided in this Agreement, before any such action shall be taken,
the Contractor shall either:
(a) buy out its obligation to make payments to NYSERDA as described in
Section 8.03 of this Agreement by paying NYSERDA an amount equal to three times
the amount of funds actually paid by NYSERDA to the Contractor under this
Agreement; or
(b) assign or otherwise transfer to a new entity the Contractor's
obligations under this Agreement, including, but not limited to, the obligation
to make payments to NYSERDA as described in Section 8.03 of this Agreement. Such
assignment or transfer shall be subject to the prior written approval of
NYSERDA. Such approval shall not be unreasonably withheld, and, in the event
that notice of approval or disapproval is not received by the Contractor within
thirty days after receipt of request for approval, the assignment or transfer
shall be considered approved. In the event that NYSERDA requires additional time
for considering approval, NYSERDA shall notify the Contractor within thirty days
of receipt of the request for approval that additional time is required and
shall specify the additional amount of time necessary up to sixty (60) days.
19
<PAGE>
Article XVII
Publicity
---------
Section 17.01. Publicity.
---------
(a) The Contractor shall collaborate with NYSERDA's Manager of Technical
Communications to prepare any press release and to plan for any news conference
concerning the Work. In addition the Contractor shall notify NYSERDA's Manager
of Technical Communications regarding any media interview in which the Work is
referred to or discussed.
(b) It is recognized that during the course of the Work under this
Agreement, the Contractor or its employees may from time to time desire to
publish information regarding scientific or technical developments made or
conceived in the course of or under this Agreement. In any such information, the
Contractor shall credit NYSERDA's funding participation in the Project, and
shall state that "NYSERDA has not reviewed the information contained herein, and
the opinions expressed in this report do not necessarily reflect those of
NYSERDA or the State of New York." Notwithstanding anything to the contrary
contained herein, the Contractor shall have the right to use and freely
disseminate project results for educational purposes, if applicable, consistent
with the Contractor's policies.
(c) Commercial promotional materials or advertisements produced by the
Contractor shall credit NYSERDA, as stated above, and shall be submitted to
NYSERDA for review and recommendations to improve their effectiveness prior to
use. The wording of such credit can be approved in advance by NYSERDA, and,
after initial approval, such credit may be used in subsequent promotional
materials or advertisements without additional approvals for the credit,
provided, however, that all such promotional materials or advertisements shall
be submitted to NYSERDA prior to use for review, as stated above. Such approvals
shall not be unreasonably withheld, and, in the event that notice of approval or
disapproval is not received by the Contractor within thirty days after receipt
of request for approval, the promotional materials or advertisement shall be
considered approved. In the event that NYSERDA requires additional time for
considering approval, NYSERDA shall notify the Contractor within thirty days of
receipt of the request for approval that additional time is required and shall
specify the additional amount of time necessary up to 60 days. If NYSERDA and
the Contractor do not agree on the wording of such credit in connection with
such materials, the Contractor may use such materials, but agrees not to include
such credit.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day, month and year first above written.
MECHANICAL TECHNOLOGY, INC. NEW YORK STATE ENERGY
20
<PAGE>
RESEARCH AND DEVELOPMENT
AUTHORITY
By: /s/ Martin J. Mastroianni By /s/ F. William Valentino
----------------------------- -----------------------------------
F. William Valentino
President
Name: Martin J. Mastroianni
---------------------------
Title: President
--------------------------
(Seal)
21
<PAGE>
STATE OF NEW YORK )
) SS:
COUNTY OF ALBANY )
On this 24th day of June , 1997, before me personally came
------ ------------------ -----
Martin J. Mastroianni , to me known, who being duly sworn, did depose and
- ----------------------------
say that he resides at Saratoga Springs, N.Y. that he is the
---------------------------------------
President of Mechanical Technology, Inc. , the
- ----------------------------------------------------------------
corporation described in and which executed the foregoing instrument; that he
knew the seal of said corporation; that the seal affixed to said instrument was
such corporate seal; that it was so affixed by the order of the Board of
Directors of said corporation, and that he signed his name thereto by like
order.
/s/ Gloria M. Edmund
- -------------------------------
Notary Public
State of New York
Gloria M. Edmund
Notary Public State of New York
No. 4522548
Qualified in Albany County
Commission Expires 1/31/99
----------
22
<PAGE>
[NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY LETTERHEAD]
December 17, 1997
Mr. William P. Sumigray
Contract Manager
Plug Power, L.L.C.
966 Albany-Shaker Road
Latham, New York 12203-6399
Dear Mr. Sumigray:
Subject: Modification No. 1 to Agreement No. 4633-ERTER-TR-98
- PEM Fuel Cell Power System Project
Reference is made to the subject Agreement between us dated June 26, 1997 (the
"Agreement").
WHEREAS, Plug Power, L.L.C. submitted a proposal to NYSERDA under competitive
solicitation 380-97 to request NYSERDA's continued support of the Project; and
WHEREAS, NYSERDA desires to provide additional funding in the amount of $256,578
under this Modification to support the Phase II effort delineated in the
attached Exhibit A-1, Statement of Work, Budget, and Schedule attached hereto
and made a part hereof.
NOW, THEREFORE, the Agreement is hereby modified as follows:
1. Agreement, upper right-hand corner, Amount: Delete the amount "$1,191,478"
------ ------
and Substitute the amount "$1,448,046".
----------
2. Article I, Definitions, Section 1.01, Definitions, (a) General Definitions,
----------- ----------- -------------------
Agreement: Delete the words "Exhibit A" and Substitute the words "Exhibits A,
--------- ------ ----------
A-l".
3. Article I, Definitions, Section 1.01, Definitions, (a) General Definitions,
----------- ----------- -------------------
Budget: Delete the words "Exhibit A" and Substitute the words "Exhibits A
------ ------ ----------
and A-l".
4. Article I, Definitions, Section 1.01, Definitions, (a) General Definitions,
----------- ----------- -------------------
Statement of Work: Delete the words "Exhibit A" and Substitute the words
----------------- ------ ----------
"Exhibits A and A-l".
5. Article I, Definitions, Section 1.01, Definitions, (a) General Definitions,
----------- ----------- -------------------
Work: Delete the words "Exhibit A" and Substitute the words "Exhibits A and
---- ------ ----------
A".
6. Article III, Deliverables, Section 3.05, Deliverables. Delete the words
------------ ------------ ------
"Exhibit A,
<PAGE>
Statement of Work" and Substitute the words "Exhibits A and A-1,
----------
Statements of Work".
7. Article IV, Compensation, Section 4.01, Cost-Sharing. Delete the amount
------------ ------------ ------
"$1,191,478" and Substitute the amount "$1,448,056".
----------
8. Article IV, Compensation, Section 4.01, Cost-Sharing, (d) Remaining Funds.
------------ ------------ ---------------
. first sentence. Delete the amount "$1,191,478" and Substitute the amount
------ ----------
"$1,448,056".
. third sentence. Delete the amount "$317,633" and Substitute the amount
------ ----------
"$256,578".
9. Article IV, Compensation, Section 4.04, Final Payment.
------------ -------------
. first sentence. Delete the words "Exhibit A, Statement of Work" and
------
Substitute the words "Exhibits A and A-1, Statements of Work".
----------
. third sentence. Delete the date "September 30, 1998" and Substitute the
------ ----------
date "December 31, 2000".
. last sentence. Delete the amount "$1,191,478" and Substitute the amount
------ ----------
"$1,448,056".
10. Article IV, Compensation, Section 4.07, Maximum Commitment. Delete the
------------ ------------------ ------
amount "$1,191,478" and Substitute the amount "$1,448,056".
----------
11. Article VI, Schedule; Acceptance of Work, Section 6.01, Schedule.
---------------------------- --------
. first sentence. Delete the words "Statement of Work" and Substitute the
------ ----------
words "Statements of Work".
. second sentence and third sentence. Delete the words "Exhibit A Schedule"
------
and Substitute the words "Exhibits A and A-1 Schedules".
----------
!2. Article VI, Schedule; Acceptance of Work, Section 6.02, Acceptance of Work.
---------------------------- ------------------
Delete the words "Exhibit A, Statement of Work" and Substitute the words
------ ----------
"Exhibits A and A-1, Statements of Work".
13. Exhibit A, Statement of Work, Schedule and Budget. Add the attached Ex A-1,
---
Statement of Work, Schedule and Budget dated December 17, 1997.
No other provision of the Agreement is otherwise changed or modified.
<PAGE>
The parties hereto do hereby indicate their acceptance of and agreement to the
foregoing by causing their duly authorized representatives to execute this
Modification No. 1 in the respective spaces provided below.
PLUG POWER, L. L.C. NEW YORK STATE ENERGY
RESEARCH AND DEVELOPMENT
AUTHORITY
By /s/ Gary Mittleman By /s/ F. William Valentino
-------------------------- ---------------------------------------
Name Gary Mittleman F. William Valentino
------------------------- President
Title Pres & CEO.
-----------------------
Jean M. Woodard
Vice President and Treasurer
[stamped]
<PAGE>
EXHIBIT A-1
-----------
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
FUEL PROCESSOR INTEGRATION PROGRAM FOR
TRANSPORTATION FUEL CELL POWER
SYSTEMS
A PROPOSAL TO THE
NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY
Prepared by:
Plug Power L.L.C.
968 Albany Shaker Road
Latham, New York 12110
March 18, 1998
This proposal contains proprietary information that may not be
divulged outside the NYSERDA
organization without prior written consent from
Plug Power L.L.C.
Executive Summary
Fuel cell power systems for transportation applications hold great promise in
meeting many areas of environmental concern, such as reduction of vehicle
emissions and fuel conservation. While some fuel cell systems are being
developed to run on pure hydrogen stored within the vehicle, more practical
vehicle designs (aimed at running on, e.g., gasoline or methanol) require the
incorporation of a fuel processor and a fuel cell that are tightly integrated to
maximize efficiency and performance. However, the integration of fuel processors
and fuel cells demands careful evaluation, analysis and attention to difficult
system integration challenges. Comprehensive understanding of the issues
associated with thermal integration, optimal system water management, control
integration and fuel impurity effects are areas that Plug Power has identified
as the most important and most critical for achieving successful
commercialization of transportation power systems.
This proposal requests NYSERDA's support for the establishment of a fuel cell,
fuel processor integration testing program that will help to resolve several of
these fundamental system integration issues.
The proposed program includes the creation of a state-of-the-art reformate stack
test stand that will be capable of supporting the testing needs of automotive
sized fuel processor and fuel cell power systems. The test stand will support
the operation of a variety of automotive fuel processor systems, and it will
support the testing of Plug Power developed fuel cells. The test stand will also
include a full complement of instrumentation and data acquisition equipment
required for comprehensive testing and evaluation of alternative system
configurations and components. Along with this unit, Plug Power will develop and
establish a testing strategy that will be designed to evaluate critical fuel
processor and fuel cell integration issues. Issues such as water balance,
control strategy integration, reformate gas composition, and thermal balancing,
of the integrated system will be primary focus areas for the testing program.
Concurrent with the establishment of the testing program, Plug Power will begin
testing fuel processors with Plug Power developed fuel cells.
This program will also establish the foundation for continued system performance
improvements resulting from continued integration testing and system design
refinements. Data acquired from testing fuel cells integrated with fuel
processors will be used to define a continuing and evolving series of technology
improvement programs, continued re-definition of integration testing plans, and
progressive refinements in system designs and performance.
Program Goals and Objectives
The ultimate goal of the proposed program is to establish a fundamental
understanding of fuel processor and fuel cell integration technology and issues
that need to be addressed to improve system performance. From this basic
understanding of the issues, further refinement of technology development
programs will emerge. As interim goals and objectives of this program, Plug
Power intends to:
. Construct a state-of-the-art test stand to permit testing of
integrated fuel processor fuel/ cell systems
. Improve our fuel processing technology base
. Perform technical assessments of fuel processors
. Evaluate reformate composition vs. fuel cell performance
. Evaluate thermal management alternatives
. Evaluate alternative methods of system water management
. Observe the effects of varying reactant stoichiometries
. Monitor the performance of alternative control strategies
. Establish a fundamental understanding of transient operation
. Begin to evaluate system start-up strategies
Background
Fuel cells have recently come into the spotlight as viable candidates for
generating the electrical power required for all-electric and/or hybrid electric
vehicles. Currently, there are several programs being conducted by Government
agencies and private organizations, which are aimed at demonstrating the ability
of fuel cells to provide the electrical power required for practical sized
vehicles.
Aside from the selection of vehicle size and type of vehicle power system for
fuel cell powered vehicles, the decision regarding fuel is perhaps the one with
the most profound implications. While hydrogen is the fuel of choice for Proton
Exchange Membrane (PEM) fuel cells, most system developers acknowledge the
problems associated with storing significant amount of hydrogen fuel on a
vehicle. This combined with the associated lack of on-highway hydrogen re-
fueling infrastructure and the difficult challenge of developing such a system
in the short term, leads power system developers into the decision to
incorporate fuel processors capable of deriving hydrogen from "popular" fuels,
such as gasoline, diesel or methanol into their system designs.
In simple terms, the fuel processor has to accomplish two goals and is usually
thought of as two separate reactors: the reformer and the CO cleanup device.
. Reformer: Reforms the hydrocarbon fuel into a hydrogen rich gas
(reformate) and
. Cleanup: Reduces the CO content of the reformate below 50 ppm.
There are basically three different types of reformers:
. Steam reformers,
. Partial oxidation reformers, and
. Catalytic autothermal reformers.
The steam reformer has the benefit of being the most widely used reformer for
large-scale commercial hydrogen production purposes, so there is a wealth of
knowledge on the technology. Of the various types of reformers, steam reforming
is also noted for being able to produce the most hydrogen per kg of input fuel.
Another positive attribute of steam reformers is the hydrogen concentration of
the reformate is the highest of all technologies, since steam reformers do not
mix any air into the chamber that produces the reformate.
The disadvantage with steam reforming is that it requires the most physical
volume and consequently will be the heaviest of the reformer options. Since the
steam reformer is the largest of the reactors, it is also most likely to have
the highest capital cost. Steam reformers also have very slow start-up times,
and are relatively slow to react to load changes.
Partial Oxidation reforming is relatively a mature and well-understood
technology; however there are significant engineering issues in reducing the
reformer size from plant-size to automotive-size. Partial oxidation has the
advantage of being compact, and having less weight than steam reforming. Partial
oxidation reformers also have fast start-up times, and are fairly responsive to
load changes. Another important advantage is that partial oxidation reformers
are promising to be the most economical of all reformer technologies.
Low hydrogen production efficiency is the main disadvantage of partial oxidation
reformers. Because air is introduced into the reactor, N\2\ dilutes the
reformate stream so the H\2\ concentration in the reformate is much lower than
that of the steam reformer. Although the technology is mature, there is less
commercial expertise with partial oxidation in comparison with steam reforming.
Catalytic Autothermal Reformers (CAR) combine the catalytic steam reforming
reaction and the partial oxidation reactions in a single reaction chamber. This
yields relatively good response times for start-ups and load changes, and also
encourages lighter weight construction, smaller volumes, and higher conversion
efficiencies.
The disadvantage with the CAR process is that it is the newest reformer
technology with the least amount of commercial experience. As is the case for
the partial oxidation system, air is introduced into the reactor, so the H\2\
concentration in the reformer will be low in comparison to the steam reformer.
The cost for such a system is projected to fall between the costs of the partial
oxidation reformer and the steam reformer.
CO cleanup devices
CO is a by-product of the reforming process, and CO in the reformate stream
hurts the performance of PEM fuel cells. Consequently, CO levels in the
reformate stream must be reduced to very low levels (10 to 50 parts-per-million,
or ppm). There are several ways of eliminating or minimizing the levels of CO in
the reformate stream. One way is to purify the hydrogen, meaning that the output
from the device is pure hydrogen. The other method is to react the CO with
another gas and convert it into another compound.
There are two hydrogen purification methods being considered; pressure swing
adsorption (PSA) and membrane separation, that can both provide extremely pure
hydrogen (less than 100 ppm CO). The benefit of such systems is that fuel cells
run more efficiently with pure hydrogen than with an H/2/-rich gas that has many
diluents, such as CO/2/ and N/2/. Currently, both processes are accomplished at
extremely high pressures (200 psi) and with fairly high capital investments.
Parasitic compression losses from the required high-pressures, as well as the
high capital costs for compressors, are the key disadvantages.
There are also several cleaning, devices that chemically convert the CO to other
compounds. One such device is a low temperature shift reactor that reacts CO
-----------------------------
with H/2/O to form CO/2/ and H/2/. Another device is a preferential oxidizer
---------------------
that reacts CO with O/2/ to get CO/2/. A third device is called a methanizer,
----------
and it reacts with CO and H/2/ to get CH/4/. Each of these devices has the
advantage of not requiring high pressures to operate and are fairly inexpensive
solutions.
The disadvantages with each of these systems are that they all need extremely
good temperature control to be able to clean the CO down to the required levels
and that the final reformate feeding the fuel cell will be filled with diluents.
The obvious challenge to developing an efficient and economical transportation
fuel cell power system configuration is confident selection of the best reformer
and CO cleanup devices. The selection process is fraught with system design
trade-offs that can only be made using reliable data acquired under operating
conditions. Other design selections need to be made based upon the results of
parametric testing of alternative system configurations.
The proposed program constructs the test stand required to test alternative fuel
processor and fuel cell configurations, to acquire the data required to make the
system design decisions.
Statement of Work
The proposed program consists of three tasks that will be conducted in parallel.
The first task will be the design and construction of a world-class reformate
fuel cell test stand, the second task will be to develop a testing program to
evaluate system integration design in order to drive toward optimal system
configurations. The third task will be dedicated to Program Management, and will
ensure that the two technical activities are well coordinated, and that the
technologies developed are coordinated with the needs of other automotive
oriented programs within Plug Power. The two technical tasks will be coordinated
through a series of design reviews and strategy development sessions that will
ensure the testing facility reflects the needs of the testing program. The
following paragraphs described the planned work for each task.
TASK 1 -Test Stand Design and Construction
Under this task, Plug Power will design and fabricate a state-of-the-art testing
reformate fuel cell test stand for integrated fuel processor and fuel cell
systems. Each test stand will be designed to meet all local safety codes, and
will provide the support services demanded by comprehensive fuel cell power
system testing.
Task 1.1 - Test Stand Definition
Under this effort, Plug Power personnel will define the performance requirements
and corresponding system needs of the test stand. Specific requirements will be
driven by the objectives of the testing engineers, and by capacities dictated by
the anticipated needs of automotive sized systems. Such needs are expected to
include, but will not be limited to:
. Fuel storage and delivery
. Air compression and delivery
. Reformate composition and quality
. Cooling system
. Service water
. Instrumentation and control
. Safety system
. Space requirements
. Electrical
. Data acquisition and storage
Results of the test stand definition work will be summarized in the form of a
"Test Stand Needs" document. This document will then be used to ensure that all
needs are reflected in the test stand.
Task 1.2 -Test Stand Design
The test stand will be designed based upon the needs defined in Task 1.1. The
initial design will be reviewed internally by Plug Power personnel to ensure
conformance with the Test Stand Needs document developed in Task 1.1. After the
design has been reviewed, a design package will be prepared and bids obtained.
In addition to the test stand design, interfaces will be completed for both fuel
processors and fuel cells. The test station design will include manual and
automated controls for all fuel processor and fuel cell parameters, and will be
based upon the recent Plug Power test station designs. Test equipment will be
carefully selected for ease of incorporation into each of the test stations and
will provide critical data concerning gas composition, reactant flow rates and
pressures, coolant loop temperatures and pressures, and characteristics of the
electrical load. Other instrumentation will be incorporated to permit the
accurate measurement and analysis of critical system mass and flow balances. The
test station is envisioned to incorporate a dedicated data acquisition processor
for high-speed collection of critical performance data.
The test station will then be connected, via a computer network, to a host
computer for storage and post-test analysis of all the data.
Task 1.3 -Test Stand Construction
The test stand will be constructed according to design and its operation
verified during commissioning tests. Wherever possible, the operation and
performance of each component will be tested to ensure that all performance
objectives have been met, and that the test stand will provide the desired
capacities of flow, pressure, load, etc. for the test articles. It is envisioned
that a fuel processor and a fuel cell will be made available to confirm the
functionality of the various system elements.
Task 2.0 - Integrated System Testing
After completion of the test stand, the task of evaluating the various system
integration issues will commence. Prior to the testing, however, a structured
test strategy will be developed followed by detailed test plans. The following
paragraphs detail the activities planned for the testing aspects of the
integrated system program.
Task 2.1 - Develop Testing Strategy and Methodology
To ensure that all system development and testing requirements are addressed in
all tests, a testing strategy and philosophy will be developed. If the testing
is to provide useful data, it is essential that all system integration issues
such as water balancing, thermal management, and integrated system control
issues are addressed in a through and consistent manner. This task will strive
to identify all the critical and essential testing objectives, and will develop
a consistent set of testing methodologies to ensure that the objectives are
consistently met. Results of this work will be used to ensure that the test
stand designed in Task 1 supports all the testing objectives.
Task 2.2 - Develop Test Plans
General testing sequences will be developed during this task that utilize the
testing methodology developed in Task 2.1, and are based upon the specific
designs of the testing facilities. These test procedures will be established to
ensure that consistent data will be acquired during all phases of testing.
Several test plans will be prepared to address specific objectives. For example,
a test plan for determining thermal balance throughout the integrated system
will be developed. Another test plan will be developed to ensure that all
anticipated control aspects of a system will be evaluated. Other general tests
will be prepared to cover initial system start-up, steady state and transient
modes of operation.
It is the intent of this task to create "generic" test recipes that can be
easily modified for use on specific fuel processors or system configurations.
Task 2.3 - Enhance Plans for First Reformer Testing
Specific test plans for a specific fuel processor and fuel cell system
components will be developed as part of this task. The general test plans
prepared in Task 2.2 will be modified and enhanced for the specific requirements
of specific reformers and system configurations. It is anticipated that a
methanol reformer will be the first device tested in the new facility.
Task 2.4 - Conduct First Reformer Testing
Utilizing the testing procedures developed in Task 2.3, the first reformer will
be tested to prepare for incorporation with the test stand. Particular attention
will be paid to the performance of the facilities and operation of the safety
systems incorporated into the facility. Other test objectives will be to confirm
expectations regarding gas composition of the reformer output stream, confirm
projections of water requirements and output from system components, and confirm
control strategies.
Task 2.5 - Conduct Second Reformer Testing
To meet the program objectives of acquiring a broad range of fuel processor
testing experience, testing of a second reformer will be conducted. In
preparation of testing the second reformer, testing plans originally developed
in Task 2.3 will be modified as required, and testing will be conducted.
Task 3.0 - Program Management
Ensuring that program objectives are achieved, and that schedules are
maintained, will be the responsibility of an active program manager. An
essential role of the program manager will be to ensure coordination between the
test stand designers and the test planners and designers.
Additionally, the Program management activity will be responsible for preparing
and delivering periodic reports to NYSERDA. and maintaining a line of frequent
communications concerning program status, progress and areas requiring attention
with representatives of NYSERDA.
Program Schedule - Plug Power has planned this proposed program for a 6-month
duration. The program plan is depicted in Figure 1 below. Plug Power promises to
make our best effort with the financial resources being supplied by New York
State to meet all targeted objectives.
[Chart Appears Here Which Sets Forth the Schedule for Completion
of Work Under the Program, as set forth below:]
<TABLE>
<CAPTION>
2nd Quarter 3rd Quarter 4th Quarter
--------------- --------------- ---------------
Task Name Apr May Jun Jul Aug Sep Oct Nov Dec
--------- --- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSERDA REFORMER PROGRAM
1.0 Test Stand
1.1 Test Stand Definition [April through May]
1.2 Test Stand Design [April]
1.3 Test Stand Construction [Mid-April through Mid-May]
2.0 Integrated System Testing [Mid-April through Mid-October]
2.1 Develop Testing Methodology [Mid-April]
2.2 Develop Test Plans [Mid-April through May]
2.3 Enhance Plans for First Reformer Tests [Mid-May]
2.4 Conduct First Reformer Testing [August-October]
2.5 Conduct Second Reformer Testing [August-October]
3.0 Program Management [April through October]
</TABLE>
Deliverables - After the completion of all work, Plug Power will submit two
copies of the draft final report to NYSERDA for Review. Within thirty days
after receipt of the annotated report from NYSERDA, Plug Power shall submit six
copies of the final report, plus one reproducible copy.
EXHIBIT A-1
-----------
[***--Note: all numbers have been omitted from this table and filed separately
with the Securities and Exchange Commission pursuant to Rule 406 under the
Securities Act]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
New York State Energy Research and Development Authority Solicitation/Contract No. Page
Contract Pricing Proposal Form
- ------------------------------------------------------------------------------------------------------------------------------------
Contractor: Name of Proposed Project:
PLUG POWER, L.L.C. FUEL PROCESSOR INTEGRATION
FOR TRANSPORTATION FUEL
CELL POWER SYSTEMS.
- -------------------------------------------------------------------------------
Address: 968 Albany-Shaker Road
Latham, New York 12110
- ------------------------------------------------------------------------------------------------------------------------------------
Location (where work is to be performed): NYSERDA funding:
SAME AS ABOVE
- ------------------------------------------------------------------------------------------------------------------------------------
Total Project Cost:
- ------------------------------------------------------------------------------------------------------------------------------------
Total Funding & Cost-sharing
Project Co-funding & Other
Cost Element Cost via NYSERDA Co-funding
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Direct Materials
- ------------------------------------------------------------------------------------------------------------------------------------
a. Purchased Parts 204,000 106,958 97,042
- ------------------------------------------------------------------------------------------------------------------------------------
b. Other FUEL 15,000 7,864 7,136
- ------------------------------------------------------------------------------------------------------------------------------------
Total Direct Materials 219,000 114,822 104,178
====================================================================================================================================
2. Materials Overhead Rate:
- ------------------------------------------------------------------------------------------------------------------------------------
3. Direct Labor (specify
names/titles) Hours Rate/hr 69,290 36,329 32,961
- ------------------------------------------------------------------------------------------------------------------------------------
ENGINEERING & 3250 $21.32
- ------------------------------------------------------------------------------------------------------------------------------------
TECHNICIAN
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Direct Labor 69,290 36,329 32,961
====================================================================================================================================
4. Labor Overhead Rate% $ Base
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Labor Overhead
====================================================================================================================================
5. Outside Special Testing
====================================================================================================================================
6. Equipment
====================================================================================================================================
7. Travel
====================================================================================================================================
8. Other Direct Costs
====================================================================================================================================
9. Subcontractors/Consultants
- ------------------------------------------------------------------------------------------------------------------------------------
BUILDING CONSULTANT 5,000 2,622 2,378
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Subcontractors/Consultants
====================================================================================================================================
10. General & Administrative
Expense Rate% Element(s)
- ------------------------------------------------------------------------------------------------------------------------------------
21.5 402,750 86,591 45,415 41,176
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
11. Fee or Profit (0 for cost-sharing
agreements) Rate:
====================================================================================================================================
12. Total Estimated Project Cost 489,341 256,578 232,763
====================================================================================================================================
This proposal reflects our best estimates of this date, in accordance with the instructions to proposers.
- ------------------------------------------------------------------------------------------------------------------------------------
Typed Name and Title: WILLIAM P. SUMIGRAY Signature: Date:
CONTRACT MANAGER /s/ William P. Sumigray 12/17/97
- ------------------------------------------------------------------------------------------------------------------------------------
Has any executive agency of the U.S. government performed any review of your records in connection with
any prime contract or subcontract within the past twelve months: X Yes No
--- ----
If yes, identify:
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Meoh fuel processor testing program
<TABLE>
<CAPTION>
April May June July August September October Totals
Phase 1
Test stand design &
fabrication
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
J. Chen 40 40 40 120
E. White 20 20 20 60
Electrician 40 80 80 200
Electrical Engineer 40 20 60
FP engineer 80 80 80 240
Engineer *M. 60 40 20 120
Cusack)
Technician 80 80 80 240
Technician 80 80 80 240
1280
Phase 2
Test planning and
procedures
J. Chen 40 40 80
E. White 20 20 40
J. Love 20 20 40
FP engineer 40 40 40 120
Engineer (M 40 40 40 120
Cusack)
Test Engineer 40 40 80
480
Phase 3
Testing
J. Chen 40 40 20 20 20 140
FP engineer 40 40 80 80 80 320
Test technician 40 40 80 80 80 320
Test technician 80 80 80 240
J. Love 20 20 20 20 20 100
1120
Phase 4
Program Mgmt
D. Hicks 40 20 20 20 20 20 20 160
J. Law 20 20 20 20 20 20 20 140
D. Neuman 10 10 10 10 10 10 10 70
370
Materials
Lab modifications $ 30,000
Fuel system $ 30,000
Fuel usage $ 15,000
FP station build $ 57,000
Computer $ 5,000
DAQ $ 7,000
Frame $ 4,000
Fittings $ 3,000
Meters $10,000
pumps $ 2,000
flow control $ 7,000
display
flow controllers 7,000
gas conditioner 2,000
Infrared CO meter 10,000
Gas Chromatograph
$ 45,000
FC station build $ 27,000
Computer@5,000
Frame@4,000
Fittings@3,000
Meters@5,000
Elec load@10,000
Cooling system $ 15,000
Building consultant $ 5,000
Total Direct Direct
Material Cost $224,000 Materials $224,000
Direct Labor and Overhead ($55/hr) $178,750
G&A $ 86,591
(21.5%)
TOTAL $489,341
</TABLE>
INDIRECT RATES
--------------
THE INDIRECT RATES APPLICABLE TO THIS BUDGET EXHIBIT A-1 ARE AS FOLLOWS:
OVERHEAD 158% X DIRECT LABOR
G&A 21.5% X DIRECT LABOR, OVERHEAD AND
G&A
<PAGE>
[NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY LETTERHEAD]
March 30, 1999
Mr. William P. Sumigray
Contract Manager
Plug Power,-L.L.C.
968 Albany-Shaker Road
Latham, New York 12203-6399
SUBJECT: MODIFICATION NO. 2 TO AGREEMENT NO. 4633-ERTER-TR-98
-- PEM Fuel Cell Power System Project
Dear Mr. Sumigray:
Reference is made to the Agreement between us dated June 26, 1997 and
Modification No. 1 dated December 17, 1997 ("the Agreement"), wherein the
following changes are hereby incorporated:
WHEREAS, NYSERDA has provided Plug Power L.L.C. with $1,448,056 for the
development of the PEM Fuel Cell Power System under the Referenced Agreement and
subsequent Modification; and
WHEREAS, NYSERDA desires to provide additional funding from the 1996 Clean
Water/Clean Air Bond Act in the amount of $3,000,000 under Agreement Number
4870-ERTER-BA-99 to undertake an air quality project and to support the Phase
III effort; and
WHEREAS, PLUG Power L.L.C. has a certain payment obligation to NYSERDA under
Section 8.03 of the Subject Agreement.
NOW, THEREFORE, the Agreement is hereby modified as follows:
1. Article VIII, Technical Data: Patents: Payments to NYSERDA. Section 8.03,
--------------------------------------------
Payments to NYSERDA, (a), Payments to NYSERDA, subparagraph (1), second
------------------- -------------------
paragraph Delete the first sentence and Substitute the following sentence,
------ ----------
"The Contractor's obligation to make payments to NYSERDA under this
subparagraph (1) shall extend for a period of 15 years thereafter or until
the Contractor has paid to NYSERDA $4,200,000, whichever occurs first,
commencing with the date of the filing
<PAGE>
of the Final Report to NYSERDA."
2. Article VIII, Technical Data: Patents: Payments to NYSERDA. Section 8.03,
--------------------------------------------
Payments to NYSERDA, (a), Payments to NYSERDA, subparagraph (2), second
------------------- -------------------
paragraph.
. Delete the first sentence and Substitute the following sentence, "The
------ ----------
Contractor's obligation to make payments to NYSERDA under this
subparagraph (2) shall extend for a period of 10 years thereafter or
until the Contractor has paid to NYSERDA $5,400,000, whichever occurs
first, commencing with the date of the filing of the Final Report to
NYSERDA."
. Delete the amount "$2,400,000" from the last sentence and Substitute the
------ ----------
amount "$5,400,000."
3. Article VIII, Technical Data: Patents: Payments to NYSERDA. Section 8.03,
--------------------------------------------
Payments to NYSERDA, (a), Payments to NYSERDA, sixth paragraph. Delete the
------------------- ------------------- ------
amount "$200,000" from the last sentence and Substitute the amount
----------
"$540,000."
No other provision of this Agreement is otherwise modified or changed.
The parties hereto do hereby indicate their acceptance of and agreement to the
foregoing by causing their duly authorized representatives to execute this
Modification No. 2 in the respective spaces provided below.
PLUG POWER L.L.C. NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY
By /s/Gary Mittleman By /s/ Jean M. Woodard
------------------------ --------------------------
Jean M. Woodard
Name Gary Mittleman Vice President & Treasurer
----------------------
Title Pres & CEO
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CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
EXHIBIT 10.15
Agreement No: 4870-ERTER-BA-99 Amount: $3,000,000 Type: Cost-Sharing
Agreement
Agreement dated this 25th day of January, 1999 by and between the NEW YORK
STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY ("NYSERDA"), a New York public
benefit corporation having its principal office and place of business at
Corporate Plaza West 286 Washington Avenue Extension, Albany, New York 12203-
6399. and PLUG POWER L.L.C., having its principal office and place of business
at 968 Albany-Shaker Road, Albany, New York 12110 (the "Contractor").
Whereas, the New York State Public Authorities Law empowers NYSERDA to
develop and implement new energy technologies consistent with economic, social
and environmental objectives, to develop and encourage energy conservation
technologies, and to promote, develop encourage and assist special energy
projects and thereby advance job opportunities, health, general prosperity and
the economic welfare of the people of the State of New York; and
Whereas, The New York State Department of Environmental Conservation
("NYSDEC"). pursuant to the 1996 Clean Water/Clean Air Bond Act, as specifically
set forth in Environmental Conservation Law Section 56-0607 is authorized, in
consultation with other state agencies as may be necessary, to make state
assistance payments for projects which will enhance the quality of the State's
environment and the State's air quality; and
Whereas, in accordance with the requirements of the Environmental
Conservation Law Section 56-0607, the NYSDEC in consultation with NYSERDA, has
developed a program to improve air quality in New York State, by improving the
performance of, or lowering product cost to accelerate the widespread use of
ultra-clean, innovative, and advanced power-generation technologies; and
Whereas, in an effort to implement this program, NYSERDA, in conjunction
with the NYSDEC issued Program Opportunity Notice 425-98 entitled "Power-
Generation Technologies Demonstrating Improvements to Air Quality" to solicit
proposals under the Program; and
Whereas, the Contractor submitted a proposal to manufacture, test, and
evaluate pre-production prototype residential fuel cell systems based upon Plug
Power's prototype 7000 PEM Fuel Cell (the "Project") and to demonstrate the
practical applications of such technology for the purpose of providing air
quality benefits through the accelerated deployment of the technology; and
Whereas, NYSERDA and the NYSDEC desire to co-sponsor the further
development of the Plug Power 7000 PEM Fuel Cell as described in the attached
Exhibit A, Statement of Work of this Agreement, which shall be considered a
continuation, enhancement, modification, and improvement to the Plug Power 7000
PEM Fuel Cell that the Contractor is continuing to develop.
<PAGE>
NOW, THEREFORE, in consideration of the premises and of the mutual promises
of the parties herein expressed, the parties agree as follows:
Article I
Definitions
Section 1.01. Definitions. Unless the context otherwise requires, the
terms defined below shall have, for all purposes of this Agreement, the
respective meanings set forth below, the following definitions to be equally
applicable to both the singular and plural forms of any of the terms defined.
(a) General Definition.
Agreement: This Agreement and Exhibits A, B, C, and D hereto, all of
which are made a part hereof as though herein set forth in full.
Budget: The Schedule and Milestone Payments set forth in Exhibit A
hereto.
Contract Administrator: NYSERDA's Director of Contract Management,
Robert G. Callender, or such other person who may be designated, in writing, by
NYSERDA.
Effective Date: The effective date of this Agreement shall be the date
in the first paragraph of page one, above.
Final Report: The Final Report required by the Statement of Work
hereof.
MWBE Goal Plan: The Plan required under Section 3.02 of this
Agreement.
MWBE Reports: The Reports required under Section 3.03 of this
Agreement.
Person: An individual, a corporation, an association or partnership,
an organization, a business or a government or political subdivision thereof, or
any governmental agency or instrumentality.
Progress Reports: The Progress Reports required by the Statement of
Work hereof.
Statement of Work: The Statement of Work attached hereto as Exhibit A.
Subcontract: An agreement for the performance of Work by a
Subcontractor, including any purchase order for the procurement of permanent
equipment or expendable supplies in connection with the Work.
Subcontractor: A person who performs Work directly or indirectly for
or on
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behalf of the Contractor (and whether or not in privity of contract with the
Contractor) but not including any employees of the Contractor or the
Subcontractors.
Work: The Work described in the Exhibit A (including the procurement
of equipment and supplies in connection therewith) and the performance of all
other requirements imposed upon the Contractor under this Agreement.
(b) Data Rights and Patents Definition.
Contract Data: Technical Data first produced in the performance of the
contract, Technical Data which are specified to be delivered under the contract,
or Technical Data actually delivered in connection with the contract.
Practical Application: To manufacture in the case of a composition or
product, to practice in the case of a process or method, or to operate in the
case of a machine or system and under conditions which indicate that the
benefits of the invention are available to the public on reasonable terms.
Proprietary Data: Technical Data which embody trade secrets developed
at private expense, such as design procedures or techniques, chemical
composition of materials, or manufacturing methods, processes, or treatments,
including minor modifications thereof provided that such data:
(i) are not generally known or available from other sources
without obligation concerning their confidentiality;
(ii) have not been made available by the owner to others without
obligation concerning its confidentiality; and
(iii) are not already available to NYSERDA without obligation
concerning their confidentiality.
Subject Invention: Any invention or discovery of the Contractor
conceived or first actually reduced to practice in the course of or under this
Agreement, and includes any art, method, process, machine, manufacture, design,
or composition of matter, or any new and useful improvement thereof, or any
variety of plants, whether patented or unpatented, under the Patent Laws of the
United States of America or any foreign country.
Technical Data: Recorded information regardless of form or
characteristic, of a scientific or technical nature. It may, for example,
document research, experimental or developmental, or demonstration, or
engineering work, or be usable or used to define a design or process, or to
procure, produce, support, maintain, or operate material. The data may be
graphic or pictorial delineations in media such as drawings or photographs, text
in specifications or related performance or design type documents or computer
software
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(including computer software programs, computer software data bases, and
computer software documentation). Examples of Technical Data include research
and engineering data, engineering drawings and associated lists, specifications,
standards, process sheets, manuals, technical reports, catalog item
identification, and related information. Technical Data as used herein does not
include financial reports, cost analyses, and other information incidental to
contract administration.
Unlimited Rights: Rights to use, duplicate, or disclose Technical
Data, in whole or in part, in any manner and for any purpose whatsoever, and to
permit others to do so.
Article II
Performance of Work
Section 2.01. Manner of Performance. Subject to the provisions of Article
XII hereof, the Contractor shall perform all of the Work described in the
Statement of Work, or cause such Work to be performed in an efficient and
expeditious manner and in accordance with all of the terms and provisions of
this Agreement. The Contractor shall perform the Work in accordance with the
current professional standards and with the diligence and skill expected for the
performance of work of the type described in the Statement of Work. The
Contractor shall furnish such personnel and shall procure such materials,
machinery, supplies, tools, equipment and other items as may reasonably be
necessary or appropriate to perform the Work in accordance with this Agreement.
Section 2.02. Project Personnel. It is understood and agreed that Mr.
John Law shall serve as Project Director and as such shall have the
responsibility of the overall supervision and conduct of the Work on behalf of
the Contractor and that the persons described in the Statement of Work shall
serve in the capacities described therein. Any change of Project Director by the
Contractor shall be subject to the prior written approval of NYSERDA. Such
approval shall not be unreasonably withheld, and, in the event that notice of
approval or disapproval is not received by the Contractor within thirty days
after receipt of request for approval by NYSERDA, the requested change in
Project Director shall be considered approved. In the event that NYSERDA
requires additional time for considering approval, NYSERDA shall notify the
Contractor within thirty days of receipt of the request for approval that
additional time is required and shall specify the additional amount of time
necessary up to 180 days.
Article III
Deliverables
Section 3.01. Deliverables. All deliverables shall be provided in
accordance with the Exhibit A Statement of Work.
Section 3.02. MWBE Goal Plan. The Contractor shall deliver to NYSERDA its
Plan to implement NYSERDA's goal of providing minority and women-owned
subcontractors and
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suppliers with at least 8.8% of subcontracts required to complete the Work as
described in Exhibit A of this Agreement. Such Plan shall be approved by NYSERDA
and NYSDEC and upon approval delivered to NYSERDA prior to commencing the Work
set forth in Exhibit A of this Agreement.
Section 3.03. MWBE Report. The Contractor shall deliver to NYSERDA
quarterly reports outlining the Contractor's progress at meeting the goal
described in Section 3.02 above.
Article IV
Compensation
Section 4.01. Payments. The Contractor will be paid upon submission of
proper invoices, the prices stipulated in the Budget for Work delivered or
rendered and accepted, less deductions, if any, as herein provided. The total
price NYSERDA shall pay to the Contractor provisions of Article XII hereof, as
represents the price of the Work. Subject to the limiting, NYSERDA's price of
the Work, NYSERDA shall pay the Contractor the total price of $3,000,000,
according to the Budget, subject to the provisions, restrictions contained
herein. Such amount shall be paid only to the extent that costs are incurred by
the Contractor in performance of the Work in accordance with the provisions of
this Agreement the Budget and the following:
(a) Staff Charges: The Contractor shall be compensated for the
services performed by its employees under the terms of this Agreement at the
employee's actual wage rate. The Contractor represents and warrants to NYSERDA
that such rates are, and during the period of this Agreement shall remain, the
lowest rates being offered or charged by the Contractor to others for the
performance of generally similar services. In the event that any of the
Contractor's rates are reduced to the benefit of any client of the Contractor as
a result of any audit or for any other reason, the Contractor shall so notify
NYSERDA and the appropriate reductions shall be made to the rates utilized
hereunder.
(b) Direct Charges: The Contractor shall be reimbursed for reasonable
and necessary actual direct costs incurred (e.g., equipment, supplies, travel
and other costs directly associated with the performance of the Agreement) to
the extent required in the performance of the Work in accordance with the
provisions of the Budget. Travel, lodging, meals and incidental expenses shall
be reimbursed for reasonable and necessary costs incurred. Costs should
generally not exceed the daily per diem rates published in the Federal Travel
Regulations. Reimbursement for the use of personal vehicles shall be limited to
the Internal Revenue Service business standard mileage rate.
(c) Indirect Costs: The Contractor shall be reimbursed for fringe
benefits, overhead, general and administrative (G&A), and other indirect costs
included in the Budget at such rates as the Contractor may periodically
calculate, consistent with appropriate federal guidelines or generally accepted
accounting principles.
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Section 4.02. Schedule of Payment. At the completion of each Milestone
Billing Event so identified in Exhibit A, the Contractor may submit invoices
requesting payment by NYSERDA of the amounts corresponding to the amount
identified in the Budget. NYSERDA shall make payment to the Contractor in
accordance with and subject to its Prompt Payment Policy Statement attached
hereto as Exhibit D. The Contractor shall be notified by NYSERDA in accordance
with Section 5.04.4 (b)(2) of such Exhibit D, of any information or
documentation which the Contractor did not include with such invoice.
Section 4.03. Title to Equipment. Title shall vest in the Contractor to
all equipment purchased hereunder subject to the provisions of the Demonstration
Agreements required in Exhibit A, Statement of Work.
Section 4.04. Final Payment. Upon final acceptance by NYSERDA of the Final
Report and all other deliverables contained in Exhibit A, Statement of Work,
pursuant to Section 6.02 hereof, the Contractor shall submit an invoice for
final payment with respect to the Work together with such supporting information
and documentation as, and in such form as, NYSERDA may require. An invoice for
final payment shall include, in addition to the material required pursuant to
Section 4.04 hereof, a statement as to whether any invention or patentable
devices have resulted from the performance of the Work. All invoices for final
payment hereunder must, under any and all circumstances, be received by NYSERDA
prior to October 1, 2001. In accordance with and subject to the provisions of
NYSERDA's Prompt Payment Policy Statement, attached hereto as Exhibit D, NYSERDA
shall pay to the Contractor within the prescribed time after receipt of such
invoice for final payment, the total amount payable pursuant to Section 4.01
hereof, less all progress payments previously made to the Contractor with
respect thereto and subject to the maximum commitment of $3,000,000 set forth in
Section 4.07 hereof.
Section 4.05. Release by NYSDEC and the Contractor. The acceptance by the
Contractor of final payment shall release NYSERDA, NYDEC, and the State of New
York from all claims and liability that the Contractor, its representatives and
assigns might otherwise have relating to this Agreement.
Section 4.06. Maintenance of Records. The Contractor shall keep, maintain,
and preserve at its principal office throughout the term of the Agreement and
for a period of seven years after acceptance of the Work, full and detailed
books, accounts, and records pertaining to the performance of the Agreement,
including without limitation, all bills, invoices, payrolls, subcontracting
efforts and other data evidencing, or in any material way related to, the direct
and indirect costs and expenses incurred by the Contractor in the course of such
performance.
Section 4.07. Maximum Commitment. The maximum aggregate amount payable by
NYSERDA to the Contractor hereunder is $3,000,000. NYSERDA shall not be liable
for any costs or expenses in excess of such amount incurred by the Contractor in
the performance and completion of the Work.
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Section 4.08. Audit. NYSERDA shall have the right from time to time and
at all reasonable times during the term of the Agreement and such period
thereafter to inspect and audit any and all books, accounts and records at the
office or offices of the Contractor where they are then being kept, maintained
and preserved pursuant to Section 4.06 hereof. Any payment made under the
Agreement shall be subject to retroactive reduction for amounts included therein
which are found by NYSERDA on the basis of any audit of the Contractor by an
agency of the United States, State of New York or NYSERDA not to constitute an
allowable charge or cost hereunder.
Article V
Assignments, Subcontracts and Purchase Orders
Section 5.01. General Restriction. Except as specifically provided
otherwise in this Article, the assignment, transfer, conveyance, subcontracting
or other disposal of this Agreement or any of the Contractor's rights,
obligations, interests or responsibilities hereunder, in whole or in part,
without the express consent in writing of NYSERDA shall be void and of no effect
as to NYSERDA.
Section 5.02. Subcontract Procedure . Without relieving it of, or in any
way limiting, its obligations to NYSERDA under this Agreement, the Contractor
may enter into Subcontracts for the performance of Work or for the purchase of
materials or equipment. Except for a subcontractor or supplier specified in a
team arrangement with the Contractor in the Contractor's original proposal, and
except for any subcontract or order for equipment, supplies or materials from a
single subcontractor or supplier totaling, under $5,000, the Contractor shall
select all subcontractors or suppliers through a process of competitive bidding
or multi-source price review. A team arrangement is one where a subcontractor or
supplier specified in the Contractor's proposal is performing a substantial
portion of the Work and is making a substantial contribution to the management
and/or design of the Project. In the event that a competitive bidding or
multi-source price review is not feasible, the Contractor shall document an
explanation for, and justification of, a sole source selection.
The Contractor shall document the process by which a subcontractor or
supplier is selected by making a record summarizing the nature and scope of the
work, equipment, supplies or materials sought, the name of each person or
organization submitting, or requested to submit, a bid or proposal, the price or
fee bid, and the basis for selection of the subcontractor or supplier. An
explanation for, and justification of, a sole source selection must identify why
the work, equipment, supplies or materials involved are obtainable from or
require a subcontractor with unique or exceptionally scarce qualifications or
experience, specialized equipment, or facilities not readily available from
other sources, or patents, copyrights, or proprietary data.
All Subcontracts shall contain provisions comparable to those set forth in
this Agreement applicable to a subcontractor or supplier, and those set forth in
Exhibit B to the extent required by law, and all other provisions now or
hereafter required by law to be
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contained therein.
The Contractor shall submit to NYSERDA's Contract Administrator for review
and written approval all subcontracts including the Phase II subcontracts,
deemed necessary by NYSERDA, based on the results and accomplishments of Phase
1. NYSERDA's maximum commitment to the Project shall not be affected by costs
incurred in subcontracting any of the Phase 11 tasks. The Contractor shall
submit to NYSERDA a copy of all fully executed subcontracts and purchase orders
that total greater than $5,000.
Section 5.03. Performance. The Contractor shall promptly and diligently
comply with its obligations under each Subcontract and shall take no action
which would impair its rights thereunder. The Contractor shall not assign,
cancel or terminate any Subcontract without the prior written approval of the
Contract Administrator as long as this Agreement remains in effect. Such
approval shall not be unreasonably withheld and, in the event that notice of
approval or disapproval is not received by the Contractor within thirty days
after receipt of request for approval by NYSERDA, the requested assignment,
cancellation, or termination of the Subcontract shall be considered approved by
NYSERDA. In the event that NYSERDA requires additional time for considering
approval, NYSERDA shall notify the Contractor within thirty days of receipt of
the request for approval that additional time is required and shall specify the
additional amount of time necessary up to 180 days.
Article VI
Schedule: Acceptance of Work
Section 6.01. Schedule. The Work shall be performed as expeditiously as
possible in conformity with the schedule requirements contained herein and in
the Statement of Work. The draft and final versions of the Final Report shall be
submitted by the dates specified in the Exhibit A Schedule. It is understood and
agreed that the delivery of the draft and final versions of such reports by the
Contractor shall occur in a timely manner and in accordance with the
requirements of the Exhibit A Schedule.
Section 6.02. Acceptance of Work. The completion of the Work shall be
subject to acceptance by NYSERDA in writing of the Final Report and all other
deliverables as defined in Exhibit A, Statement of Work.
Article VII
Force Majeure
Section 7.01. Force Majeure. Neither party hereto shall be liable for any
failure or delay in the performance of its respective obligations hereunder if
and to the extent that such delay or failure is due to a cause or circumstance
beyond the reasonable control of such party, including, without limitation, acts
of God or the public enemy, expropriation or confiscation of land or facilities,
compliance with any law, order or request of any Federal, State, municipal or
local governmental authority, acts of war, rebellion or sabotage or damage
resulting
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therefrom, fires, floods, storms, explosions, accidents, riots, strikes, or the
delay or failure to perform by any Subcontractor by reason of any cause or
circumstance beyond the reasonable control of such Subcontractor.
Article VIII
Technical Data, Patents
Section 8.01. Rights in Technical Data.
(a) Technical Data: Rights in Technical Data shall be allocated
as follows:
(1) NYSERDA shall have:
(i) unlimited rights in Contract Data except as
otherwise provided below with respect to Proprietary Data; and
(ii) no rights under this Agreement in any Technical
Data which are not Contract Data.
(2) The Contractor shall have:
(i) the right to withhold Proprietary Data in
accordance with the provisions of this clause; and
(ii) the right to make, use and sell the 7000 PEM Fuel
Cell. If the Contractor fails to make, use, and sell the 7000 PEM Fuel Cell
within five years from the Contractor's receipt of Final Payment as
described in Section 4.04 hereof, under conditions which indicate that the
benefits of the 7000 PEM Fuel Cell are available to the public on
reasonable terms, NYSERDA shall have a royalty-free, exclusive, worldwide
license sufficient in scope to allow NYSERDA to make, use or sell the 7000
PEM Fuel Cell and to allow others to do so, including a non-exclusive right
in Proprietary Data incorporated into or necessary for use in connection
with the making, use, or sale of the 7000 PEM Fuel Cell by NYSERDA or its
sublicensees. The Contractor agrees to disclose such Proprietary Data to
NYSERDA, and NYSERDA may disclose such Proprietary Data to its sublicensees
who have agreed to keep such Proprietary Data confidential; and
(iii) the right to use for its private purposes subject
to patent, or other provisions of this Agreement, Contract Data it first
produces in the performance of this Agreement provided the data
requirements of this Agreement have been met as of the date of the private
use of such data.
The Contractor agrees that to the extent it receives or is given access to
Proprietary
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Data or other technical, business or financial data in the form of recorded
information from NYSERDA or a NYSERDA contractor or subcontractor, the
Contractor shall treat such data in accordance with any restrictive legend
contained thereon, unless another use is specifically authorized by prior
written approval of the Contract Administrator.
Section 8.02. Patents.
(a) The Contractor may elect to retain the entire right, title
and interest throughout the world to each Subject Invention of the Contractor
conceived or first actually reduced to practice in the performance of the Work
under the Agreement; except, that with respect to any Subject Invention in which
the Contractor elects to retain title, NYSERDA shall have a non-exclusive, non-
transferrable, irrevocable, paid-up license for itself, the State of New York
and all political subdivisions and other instrumentalities of the State of New
York, to practice or have practiced for or on their behalf the Subject Invention
throughout the world, exclusively for their own use of the Subject Invention.
(b) Within six months of the time a Subject Invention is made,
or as part of the request for final payment, whichever shall occur first, the
Contractor shall submit to NYSERDA a written invention disclosure. Within twelve
months of the time a Subject Invention is made, or as part of the request for
final payment, whichever shall occur first, the Contractor shall advise NYSERDA
in writing whether the Contractor elects to retain principal rights in the
Subject Invention. The Contractor shall file the patent application for a
Subject Invention within two years of the date of election. If the Contractor
fails to disclose a Subject Invention, fails to elect to retain principal rights
thereto, or to file a patent application within the time specified in this
paragraph, or if the Contractor elects not to retain principal rights in a
Subject Invention, the Contractor shall convey to NYSERDA title to the Subject
Invention unless NYSERDA shall waive in writing its right to take title. In the
event the Contractor elects not to retain principal rights in a Subject
Invention, the Contractor shall retain a non-exclusive, royalty-free license
throughout the world in such Subject Invention transferable only with the
written approval of NYSERDA. Such approval shall not be unreasonably withheld,
and, in the event that notice of approval or disapproval is not received by the
Contractor within thirty days after receipt of request for approval, the
requested transfer shall be considered approved. In the event that NYSERDA
requires additional time for considering approval, NYSERDA shall notify the
Contractor within thirty days of receipt of the request for approval that
additional time is required and shall specify the additional amount of time
necessary up to 180 days.
(c) The Contractor shall submit to NYSERDA, not less frequently
than annually, written reports which indicate the status of utilization of
Subject Inventions in which the Contractor retains principal rights. The reports
shall include information regarding the status of development, date of first
commercial sale or use, and gross royalties received by the Contractor. Such
report shall be furnished to NYSERDA not later than February 1 following the
calendar year covered by the report. In the event the Contractor fails to
demonstrate that the Contractor has taken effective steps within three years
after a patent is issued to bring the
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Subject Invention to the point of Practical Application, then NYSERDA shall have
the right to grant a non-exclusive or exclusive license to responsible
applicants under terms that are reasonable under the circumstances, or to
require the Contractor to do so.
(d) The Contractor shall include the foregoing patent clauses,
suitably modified to identify the parties, in all subcontracts which involve the
performance of Work under this Agreement. The Subcontractor shall retain all
rights provided for the Contractor, and the Contractor shall retain all rights
provided for NYSERDA, as set forth above.
Article IX
Warranties and Guarantees
Section 9.01. Warranties and Guarantees. The Contractor warrants and
guarantees that:
(a) it is financially and technically qualified to perform the
Work;
(b) it is familiar with and will comply with all general and
special Federal, State, municipal and local laws, ordinances and regulations, if
any, that may in any way affect the performance of this Agreement;
(c) the design, supervision and workmanship furnished with
respect to performance of the Work shall be in accordance with sound and
currently accepted scientific standards and engineering practices;
(d) all materials, equipment and workmanship furnished by it and
by Subcontractors in performance of the Work or any portion thereof shall be
free of defects in material and workmanship, and all such materials and
equipment shall be of first-class quality, shall conform with all applicable
codes, specifications, standards and ordinances and shall have service lives and
maintenance characteristics suitable for their intended purposes in accordance
with sound and currently accepted scientific standards and engineering
practices;
(e) neither the Contractor nor any of its employees, agents,
representatives or servants has actual knowledge of any patent issued under the
laws of the United States or any other matter which could constitute a basis for
any claim that the performance of the Work or any part thereof infringes any
patent or otherwise interferes with any other right of any Person;
(f) there are no existing undisclosed or threatened legal
actions, claims, or encumbrances, or liabilities that may adversely affect the
Work or NYSERDA's rights hereunder; and
(g) it has no actual knowledge that any information or document
or statement furnished by the Contractor in connection with this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statement not
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misleading, and that all facts have been disclosed that would materially
adversely affect the Work.
Article X
Indemnification
Section 10.01. Indemnification. The Contractor shall protect, indemnify and
hold harmless NYSERDA, NYSDEC, and the State of New York from and against all
liabilities, losses, claims, damages, judgments, penalties, causes of action,
costs and expenses (including, without limitation, attorneys' fees and expenses)
imposed upon or incurred by or asserted against NYSERDA, NYSDEC, or the State of
New York resulting from, arising out of or relating to the performance of this
Agreement. The obligations of the Contractor under this Article shall survive
any expiration or termination of this Agreement and shall not be limited by any
remuneration herein of required insurance coverage.
Article XI
Insurance
Section 11.01. Maintenance of Insurance: Policy Provision . The Contractor,
at no additional cost to NYSERDA and NYSDEC, shall maintain or cause to be
maintained throughout the term of this Agreement, insurance of the types and in
the amounts specified in the Section hereof entitled Types of Insurance. All
such insurance shall be evidenced by insurance policies, each of which shall:
(a) name or be endorsed to cover NYSERDA, NYSDEC, the State of
New York and the Contractor as insureds, as their respective interests may
appear;
(b) provide that such policy may not be cancelled or modified
until at least 30 days after receipt by NYSERDA of written notice thereof, and
(c) be reasonably satisfactory to NYSERDA in all other respects.
Section 11.02. Types of Insurance. The types and amounts of insurance
required to be maintained under this Article are as follows:
(a) Commercial general liability insurance for bodily injury
liability, including death, and property damage liability, incurred in
connection with the performance of this Agreement, with minimum limits of
$1,000,000 in respect of claims arising out of personal injury or sickness or
death of any one person, $1,000,000 in respect of claims arising out of personal
injury, sickness or death in any one accident or disaster, and $1,000,000 in
respect of claims arising out of property damage in any one accident or
disaster; and
(b) Commercial automobile liability insurance in respect of
motor vehicles owned, licensed or hired by the Contractor and the Subcontractors
for bodily injury liability,
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including death and property damage, incurred in connection with the performance
of this Agreement, with minimum limits of $500,000 in respect of claims arising
out of personal injury, or sickness or death of any one person, $1,000,000 in
respect of claims arising out of personal injury, sickness or death in any one
accident or disaster, and $500,000 in respect of claims arising out of property
damage in any one accident or disaster.
Section 11.03. Delivery of Policies: Insurance Certificate. Prior to
commencing the Work, the Contractor shall deliver to NYSERDA certificates of
insurance issued by the respective insurers, indicating the Agreement number
thereon, evidencing the insurance required by this Article and bearing notations
evidencing the payment of the premiums thereon or accompanied by other evidence
of such payment satisfactory to NYSERDA. In the event any policy furnished or
carried pursuant to this Article will expire on a date prior to acceptance of
the Work by NYSERDA pursuant to the section hereof entitled Acceptance of Work.
The Contractor, not less than 15 days prior to such expiration date, shall
deliver to NYSERDA certificates of insurance evidencing the renewal of such
policies, and the Contractor shall promptly pay all premiums thereon due. In the
event of threatened legal action, claims. encumbrances, or liabilities that may
affect NYSERDA hereunder. or if deemed necessary by NYSERDA due to events
rendering a review necessary, upon request the Contractor shall deliver to
NYSERDA a certified copy of each policy.
Article XII
Stop Work Order: Termination
Section 12.01. Stop Work Order.
(a) NYSERDA may at any time, by written Order to the Contractor,
require the Contractor to stop all or any part of the Work called for by this
Agreement for a period of up to 90 days after the Stop Work Order is delivered
to the Contractor, and for any further period to which the parties may agree.
Any such order shall be specifically identified as a Stop Work Order issued
pursuant to this Section. Upon receipt of such an Order, the Contractor shall
forthwith comply with its terms and take all reasonable steps to minimize the
incurrence of costs allocable to the Work covered by the Order during the period
of work stoppage consistent with public health and safety. Within a period of 90
days after a Stop Work Order is delivered to the Contractor, or within any
extension of that period to which the parties shall have agreed. NYSERDA shall
either:
(i) by written notice to the Contractor, cancel the Stop
Work Order, which shall be effective as provided in such cancellation
notice, or if not specified therein, upon receipt by the Contractor, or
(ii) terminate the Work covered by such order as provided
in the Termination Section of this Agreement.
(b) If a Stop Work Order issued under this Section is cancelled
or the period
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of the Order or any extension thereof expires, the Contractor shall resume Work.
An equitable adjustment shall be made in the delivery schedule, the estimated
cost, the fee, if any, or a combination thereof, and in any other provisions of
the Agreement that may be affected, and the Agreement shall be modified in
writing accordingly, if:
(i) the Stop Work Order results in an increase in the time
required for, or in the Contractor's cost properly allocable to, the
performance of any part of this Agreement, and
(ii) the Contractor asserts a claim for such adjustments
within 30 days after the end of the period of Work stoppage; provided that,
if NYSERDA decides the facts justify such action, NYSERDA may receive and
act upon any such claim asserted at any time prior to final payment under
this Agreement.
(c) If a Stop Work Order is not cancelled and the Work covered
by such Order is terminated, the reasonable costs resulting from the Stop Work
Order shall be allowed by equitable adjustment or otherwise.
(d) Notwithstanding the provisions of this Section 12.01, the
maximum amount payable by NYSERDA to the Contractor pursuant to this Section
12.01 shall not be increased or deemed to be increased except by specific
written amendment hereto.
Section 12.02. Termination.
(a) This Agreement may be terminated by NYSERDA at any time
during the term of this Agreement with or without cause, upon 30 days prior
written notice to the Contractor. In such event, compensation shall be paid to
the Contractor for Work performed and expenses incurred prior to the effective
date of termination in accordance with the provisions of the Article hereof
entitled Compensation and in reimbursement of any amounts required to be paid by
the Contractor pursuant to Subcontracts; provided, however, that upon receipt of
any such notice of termination, the Contractor shall cease the performance of
Work, shall make no further commitments with respect thereto and shall reduce
insofar as possible the amount of outstanding commitments (including, to the
extent requested by NYSERDA, through termination of subcontracts containing
provisions therefor).
(b) Nothing in this Article shall preclude the Contractor from
continuing to carry out the Work called for by the Agreement after receipt of a
Stop Work Order or termination notice at its own election, provided that, if the
Contractor so elects, (i) any such continuing Work after receipt of the Stop
Work Order or termination notice shall be deemed not to be Work pursuant to the
Agreement and (ii) NYSERDA shall have no liability to the Contractor for any
costs of the Work continuing after receipt of the Stop Work Order or termination
notice.
Article XIII
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Independent Contractor
Section 13.01. Independent Contractor. The status of the Contractor under
this Agreement shall be that of an independent contractor and not that of an
agent, and in accordance with such status, the Contractor, the Subcontractors,
and their respective officers, agents, employees, representatives and servants
shall at all times during the term of this Agreement conduct themselves in a
manner consistent with such status and by reason of this Agreement shall neither
hold themselves out as, nor claim to be acting in the capacity of, officers,
employees, agents, representatives or servants of NYSERDA nor make any claim,
demand or application for any right or privilege applicable to NYSERDA,
including, without limitation, rights or privileges derived from workers'
compensation coverage, unemployment insurance benefits, social security coverage
and retirement membership or credit.
Article XIV
Compliance with Certain Law
Section 14.01. Laws of the State of New York. The Contractor shall comply
with all of the requirements set forth in Exhibit B hereto.
Section 14.02. All Legal Provisions Deemed Included. It is the intent and
understanding of the Contractor and NYSERDA that each and every provision of law
required by the laws of the State of New York to be contained in this Agreement
shall be contained herein, and if, through mistake, oversight or otherwise, any
such provision is not contained herein, or is not contained herein in correct
form, this Agreement shall, upon the application of either NYSERDA or the
Contractor, promptly be amended so as to comply strictly with the laws of the
State of New York with respect to the inclusion in this Agreement of all such
provisions.
Section 14.03. Other Legal Requirements. The references to particular laws
of the State of New York in this Article, in Exhibit B and elsewhere in this
Agreement are not intended to be exclusive and nothing contained in such
Article, Exhibit and Agreement shall be deemed to modify the obligations of the
Contractor to comply with all legal requirements.
Article XV
Severability
Section 15.01. Severability. This Agreement is intended to be performed in
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations, and is intended, and shall for all purposes
to be deemed to be, a single, integrated document setting forth all of the
agreements and understandings of the parties hereto, and superseding all prior
negotiations, understandings and agreements of such parties. If any term or
provision of this Agreement or the application thereof to any person or
circumstance shall for any reason and to any extent be held to be invalid or
unenforceable, then such term or provision shall be ignored, and to the maximum
extent possible, this Agreement shall continue
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in full force and effect, but without giving effect to such term or provision.
Article XVI
Notices, Entire Agreement, Amendment, Counterpart
Section 16.01. Notices. All notices, requests, consents, approvals and
other communications; which may or are required to be given by either party to
the other under this Agreement shall be deemed to have been sufficiently given
for all purposes hereunder when delivered or mailed by registered or certified
mail, postage prepaid, return receipt requested, (i) if to NYSERDA, at Corporate
Plaza West 286 Washington Avenue Extension, Albany, New York 12203-6399 or at
such other address as NYSERDA shall have furnished to the Contractor in writing,
and (ii) if to the Contractor at 968 Albany-Shaker Road, Albany, New York 12110,
or such other address as the Contractor shall have furnished to NYSERDA in
writing.
Section 16.02. Entire Agreement: Amendment. This Agreement embodies the
entire agreement and understanding between NYSERDA and the Contractor and
supersedes all prior agreements and understandings relating to the subject
matter hereof. Except as otherwise expressly provided for herein, this Agreement
may be changed, waived, discharged or terminated only by an instrument in
writing, signed by the party against which enforcement of such change, waiver,
discharge or termination is sought.
Section 16.03. Counterparts. This Agreement may be executed in counterparts
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
Article XVII
Publicity
Section 17.01. Publicity.
(a) For a period of fifteen years from the date of execution of
this Agreement, the Contractor shall collaborate with NYSERDA's Manager of
Technical Communications to prepare any press release and to plan for any news
conference concerning the Work. In addition, the Contractor shall notify in
advance NYSERDA's Manager of Technical Communications regarding any media
interview in which the Work is referred to or discussed. Subsequent to the
fifteen year period, the Contractor shall make every good faith effort to
provide prompt notification to NYSERDA's Manager of Technical Communications of
any press releases and media events.
(b) In connection with any scientific or technical publications,
the Contractor may from time to time desire to publish information regarding
scientific or technical developments made or conceived in the course of or under
this Agreement. In any such information the Contractor shall credit NYSERDA's
funding participation in the Project, and
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shall state that NYSERDA has not reviewed the information contained herein, and
the opinions expressed in this report do not necessarily reflect those of
NYSERDA or the State of New York. Notwithstanding anything to the contrary
contained herein, the Contractor shall have the right to use and freely
disseminate project results for educational purposes, if applicable, consistent
with the Contractor's policies.
(c) For a period of fifteen years from the date of execution of
this Agreement, commercial promotional materials or advertisements produced by
the Contractor concerning the Work shall credit NYSERDA, as stated above, and
shall be submitted to NYSERDA for review and recommendations to improve their
effectiveness prior to use. The wording of such credit can be approved in
advance by NYSERDA and, after initial approval, such credit may be used in
subsequent promotional materials or advertisements without additional approvals
for the credit, provided, however, that all such promotional materials or
advertisements shall be submitted to NYSERDA prior to use for review, as stated
above. Such approvals shall not be unreasonably withheld, and, in the event that
notice of approval or disapproval is not received by the Contractor within
thirty days after receipt of request for approval, the promotional materials or
advertisement shall be considered approved. In the event that NYSERDA requires
additional time for considering approval, NYSERDA shall notify the Contractor
within thirty days of receipt of the request for approval that additional time
is required and shall specify the additional amount of time necessary up to 180
days. If at any time NYSERDA and the Contractor do not agree on the wording of
such credit in connection with such materials, the Contractor may use such
materials, but agrees not to include such credit.
Article XVIII
Availability of Funds
Section 18.01. Availability of Funds. This Agreement is conditioned upon
the continued availability of funds for its purposes. Should such funds become
unavailable, the Contractor and NYSERDA shall be relieved of any obligations
hereunder beyond the period for which funds have actually been obligated;
provided, however, that the Contractor shall in all events remain responsible
for the completion of all reporting and record retention requirements under this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day, month and year first above written.
PLUG POWER, L.L.C.
By: /s/ Gary Mittleman
-----------------------
Title: President and CEO
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NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY
By: /s/ F. William Valentino
----------------------------
Title: President
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EXHIBIT A
STATEMENT OF WORK (SOW)
4870-ERTER-BA-99
FUEL CELL DEMONSTRATION PROJECT
OBJECTIVES
The overall objective is to manufacture, test, evaluate and demonstrate a
total of 80 Plug Power 7000 PEM fuel cell power systems. The publicly accessible
demonstration sites shall be spread across publicly-owned facilities in New York
State for a variety of different applications that verify the ultra clean and
environmentally friendly nature of PEM fuel cell power systems and garner public
support for their early introduction. This Project accelerates the process of
and acts as a catalyst for the wide scale deployment and commercialization of
distributed fuel cell generation throughout the world. Data shall be collected
on emissions and operating experience that quantify air quality improvement,
fuel efficiency, and provide a basis for future product upgrade and cost
reduction efforts.
This effort consists of a three-phased Project that proceeds rapidly from
laboratory evaluation of pre-production prototype units to initial field
evaluation to large-scale field demonstration of production units.
TASKS
PHASE I - LABORATORY EVALUATION OF PRE-PRODUCTION PROTOTYPE UNITS
A total of 24 Plug Power 7000 PEM fuel cell powers systems shall be built
by the Contractor and evaluated demonstrated in conjunction with the New York
State Center for Fuel Cell Science and Technology. The test/demonstration shall
focus on increasing the experience database for failure mode effects analysis
(FMEA) establishing operating strategies for the selected applications, and
gaining endurance experience under simulated field conditions.
Task I-1. Manufacture of Pre-production Prototype Units 24
- --------------------------------------------------------------
The Contractor shall deliver a set of complete draft performance
specifications for the Plug Power 7000 unit to the NYSERDA Project Manager and
NYSDEC for review, comment, and written acceptance from the NYSERDA Project
Manager. The Contractor shall build 24 pre-production prototype units using the
best available technology that is expected to represent the serial production
commercial product to be manufactured by Plug Power as the Plug Power 7000 and
that meets the performance specifications. These units shall be complete systems
containing all three major subsystems (fuel processor, stack and power
conditioner) except for the first six units which will not require reformers
since they will operate on simulated reformate. The units may utilize different
components or control strategies for comparative evaluation purposes.
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Task I-2. Test and Evaluation Program
- --------------------------------------
The Contractor shall develop a test plan to evaluate the reliability,
endurance, and performance of the test units and their subcomponents in the
laboratory under simulated field operating conditions, and shall submit the test
plan to the NYSERDA Project Manager and NYSDEC for review, comment, and written
approval from the NYSERDA Project Manager. The Contractor may amend the test
plan from time to time throughout the test and evaluation program to accommodate
changing design features or to more fully evaluate certain aspects of system
performance; and each change to the test plan shall be submitted to the NYSERDA
Project Manager and NYSDEC for review, comment, and written approval from the
NYSERDA Project Manager. Test activities to be included in the plan are those
of Tasks I-2, I-6, and I-7. The test plan shall include a list or brief
description of test procedures, data to be collected, and success criteria. The
target life for the commercial production system of [***] hours with planned
maintenance requires extensive endurance testing at both the system and
component level. Adequate repeat data shall be taken in such a manner as to
facilitate the failure modes and effects analysis program. Accelerated life
testing of specific components shall be used whenever feasible. The Contractor
shall conduct testing, which will take place in conjunction with the New York
State Center for Fuel Cell Science and Technology, in accordance with the
approved test plan and amendments thereto.
Task I-3. Failure Modes and Effects Analysis Program and Test Design
- ---------------------------------------------------------------------
The Contractor shall use test data and analysis to determine failure modes
and effects. The Contractor shall adjust the test plan of Task I-2 to more fully
address the findings, if needed, in accordance with the procedure specified in
Task I-2.
Task I-4. Performance Improvements
- -----------------------------------
The Contractor shall use the results of Tasks I-2 and I-3 to identify
design changes that allow use of the lowest cost components that meet the
overall life, reliability, and other performance specifications and project
requirements. The design improvements shall be incorporated in hardware and
tested in Task I-2. When the improvement is verified it shall be incorporated
into the production design.
Task I-5. Cost Improvements
- ----------------------------
The Contractor shall analyze data generated in Tasks I-2 and I-3 to
identify design improvements that reduce cost without impacting performance
relevant to the expected applications. The design improvements shall be
incorporated in hardware and tested in Task I-2. When the improvement is
verified it shall be incorporated into the production design.
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Task I- 6. Environmental Testing
- ---------------------------------
The Contractor shall subject one or more units to environmental testing
over the range of expected operating conditions in accordance with the approved
test plan (Task I-2). Typical operating ranges include -40 degrees F to
120 degrees F, -600 ft to 6000 ft elevation, water and salt spray environment,
electro-magnetic radiation (EMR), etc. The Contractor shall make and retest
design improvements as needed to meet performance requirements and success
criteria in accordance with the approved test plan.
Task I-7. Emissions and Performance Certification
- --------------------------------------------------
The Contractor shall submit to the NYSERDA Project Manager and NYSDEC, for
written approval from the NYSERDA Project Manager, the name and address of
qualified independent laboratories to perform testing in this task. The
Contractor shall have tests, as identified in the approved test plan (Task I-2),
conducted by an approved laboratory to determine overall performance,
efficiency, emissions (CO, NMOG, NO/x/, particulates), electrical (i.e., EMR)
and acoustical noise, etc. Where a value exceeds that considered to be
acceptable in accordance with the approved test plan and accepted performance
specifications, the Contractor shall take remedial action to correct the
unacceptable parameter, and verify the impact of the action through retest.
Task I-8. Interim Report
- -------------------------
The Contractor shall document the results of Phase I in an Interim Report,
including summary tables or graphs of data collected, the results of all
testing, and FMEA, and submit the report to the NYSERDA Project Manager and
NYSDEC. (Results shall also be presented at the end-of-phase review, in
accordance with Task IV-2.)
PHASE II - INITIAL FIELD EVALUATION
Task II-1. Manufacture of Pre-production Prototype Units (6)
- -----------------------------------------------------------
The Contractor shall manufacture six units using in the design, wherever
possible, the information gained or design changes from Phase I that would
improve performance or reduce cost. At a minimum, any design changes required to
meet minimum performance requirements, in accordance with the accepted
performance specification, shall be included.
Task II-2. Site Selection and Design
- -------------------------------------
The Contractor shall develop a Field Evaluation Plan, identifying in detail
all tests to be accomplished, data to be collected, analysis to be performed and
success criteria. The Contractor shall submit the Field Evaluation Plan to the
NYSERDA Project Manager and NYSDEC for review, comments, and written approval
from the NYSERDA Project Manager. The Contractor may amend the Field Evaluation
Plan from time to time throughout the field evaluation period to accommodate
needed design changes or to more fully evaluate some aspect of system
performance; and the Contractor shall submit all changes to the NYSERDA Project
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Manager and NYSDEC for review, comment, and written approval of the NYSERDA
Project Manager. The plan shall identify intervals between emissions testing,
data collection rates, and required monitoring, equipment, at a minimum.
Analysis shall include a determination of air quality and energy benefits of the
fully integrated system, at a minimum.
The Contractor shall develop and submit to NYSERDA and NYSDEC for review,
comment, and written approval from the NYSERDA Project Manager, a Standard Draft
Site Operating Agreement which shall be the basis for negotiating individual
site operating agreements. This Standard Draft Site Operating Agreement shall
address issues such as the State Environmental Quality Review Act (SEQRA), site
preparation, site operator training, site maintenance, fuel cell system
maintenance, fuel type and availability, insurance, liability, restoration of
the site at the end of field evaluation, associated costs and responsibilities
for those costs, and other issues determined necessary by NYSERDA or NYSDEC. It
shall also address the ownership and rights to use the fuel cell units and
fixtures after the field evaluation.
The Contractor shall coordinate with NYSERDA and NYSDEC during NYSDEC's
site selection process. The Contractor shall develop specifications and
requirements for potential field evaluation sites based on the fuel cell systems
to be demonstrated, support requirements, and other factors, and shall provide
those specifications and requirements to the NYSERDA Project Manager and NYSDEC.
The Contractor shall work with the selected site owners/operators to establish
the installation requirements, and shall develop a design that is adequate for a
subcontractor to install the mounting pad, fuel supply, electrical connection,
exhaust, and protective building, or any combination thereof. These requirements
are expected to vary with the specific application and may include utility grid
connection, choice of fuel, inside or outside installation, concrete pool, etc.
The Contractor shall develop and enter into a Field Evaluation Site Operating
Agreement, based on the Standard Draft Site Operating Agreement, with each site
operator.
Task II-3. System Installation
- -------------------------------
The Contractor shall subcontract for the site modifications and
installation of the fuel cell system. The Contractor shall verify that the site
is ready before the system is installed. The Contractor shall provide and
install a remote data acquisition and control system to obtain frequent updates
on system operating data and performance.
Task II-4. Commissioning
- -------------------------
The Contractor shall examine the fuel cell system installation and verify
that it is installed properly. The Contractor shall operate the system
correcting all problems and certify that it is operating properly. The system
shall then be turned over to the site owner/operator for use in accordance with
the Field Evaluation Site Operating Agreement.
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Task II-5. Field Support and Data Collection
- ---------------------------------------------
The systems are expected to operate for two to twelve months or until no
further useful information can be obtained from them. The Contractor shall
retain ownership of the system for the duration of the field evaluation period.
The Contractor shall establish and implement a preventative maintenance plan for
each system. The Contractor shall monitor, collect and maintain data to support
analysis in accordance with the approved Field Evaluation Plan and to ensure
maximum system availability by providing quick response to system failures.
Task II-6. Troubleshooting
- ---------------------------
The Contractor shall maintain the capability to provide routine service and
service for unanticipated failures within a short time of a problem being
reported. The Contractor's service team shall carry a supply of all critical
parts in order to make speedy repairs. The service team shall be supported by
additional Contractor staff as required.
Task II-7. Data Analysis
- -------------------------
The Contractor shall analyze the data to determine overall unit operation,
performance, areas for improvement, and other information in accordance with the
approved Field Evaluation Plan.
Task II-8. Field Evaluation Completion
- ---------------------------------------
Upon the completion of a particular demonstration, the Contractor shall
perform the appropriate tasks as per the Field Evaluation Site Operating
Agreement.
Task II-9. Field Evaluation Report
- -----------------------------------
Upon completion of Phase II, the Contractor shall write an interim report
documenting the field evaluation results, including a summary of the data
collected and the results of the analysis specified in the Field Evaluation
Plan. The Contractor shall submit the report to the NYSERDA Project Manager and
NYSDEC. (Results shall also be presented at the end-of-phase review, in
accordance with Task IV.) The Contractor shall update the performance
specification approved in Task I-1 to reflect design changes implemented in
Phases I and II, and shall submit the revised performance specification to the
NYSERDA Project Manager and NYSDEC for review, comment, and written acceptance
of the NYSERDA Project Manager.
PHASE III - DEMONSTRATION OF PRODUCTION UNITS (50)
It is expected that the manufacturing design will have reached a level of
maturity such that there is a significant confidence level for relatively
unsupported operation. The demonstration program for this phase reflects that
confidence level.
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Task III-1. Manufacture of Production Units
- --------------------------------------------
The Contractor shall manufacture fifty production units incorporating the
information gained or design changes from Phases I and II that would improve
performance or reduce cost, and that will meet the performance requirements of
the accepted performance specification and accepted revisions thereto.
Task III-2. Site Selection and Design
- -------------------------------------
The Contractor shall develop a Demonstration Plan, identifying in detail
all tests to be accomplished, data to be collected, and analysis to be performed
during Phase III. The Contractor shall submit the Demonstration Plan to the
NYSERDA Project Manager and NYSDEC for review, comment, and written approval of
the NYSERDA Project Manager. The plan shall identify intervals between emissions
testing, data collection rates, required monitoring equipment, and duration of
the demonstration program, at a minimum. Analysis shall include a determination
of air quality and energy benefits, at a minimum.
The Contractor shall coordinate with NYSERDA and NYSDEC during NYSDEC's
site selection process. The Contractor shall develop specifications and
requirements for potential demonstration sites based on the fuel cell systems to
be demonstrated, support requirements, and other factors, and shall provide
those specifications and requirements to the NYSERDA Project Manager and NYSDEC.
The Contractor shall work with the selected site owners/operators to establish
the installation requirements, and shall develop a design that is adequate for a
subcontractor to install the mounting pad, fuel supply, electrical connection,
exhaust, and protective building, or any combination thereof. These
requirements are expected to vary with the specific application and may include
utility grid connection, choice of fuel, inside or outside installation,
concrete pad, etc. The Contractor shall develop and enter into a Demonstration
Site Operating Agreement, based on the Demonstration Plan and Standard Draft
Site Operating Agreement (Task II-2), with each site owner.
Task III-3. System Installation
- --------------------------------
The Contractor shall subcontract for the site modifications and
installation of the demonstration unit. The Contractor shall verify that the
site is ready before the unit is installed. The Contractor shall provide and
install a remote data acquisition and control system to obtain frequent updates
on system operating data and performance.
Task III-4. Commissioning
- -------------------------
The Contractor shall examine the unit installation and verify that the unit
is installed properly. The Contractor shall operate the unit correcting all
problems and certify that it is operating properly. The unit shall then be
turned over to the site owner, operator for use in accordance with the
Demonstration Site Operating Agreement.
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Task III-5, Field Support and Data Collection
- ---------------------------------------------
The systems are expected to operate for a minimum of two months. The
Contractor shall retain ownership of the system for the duration of the
demonstration period. The Contractor shall establish and implement a
preventative maintenance plan for each system. The Contractor shall monitor,
collect and maintain data to support analysis in accordance with the approved
Demonstration Plan and to ensure maximum system availability by providing quick
response to system failures.
Task III-6. Troubleshooting
- ----------------------------
The Contractor shall maintain the capability to provide routine service and
service for unanticipated failures within a short time of a problem being
reported. The Contractor's service team shall carry a supply of all critical
parts in order to make speedy repairs. The service team shall be supported by
additional Contractor staff as required.
Task III-7. Data Analysis
- --------------------------
The Contractor shall analyze the data to determine overall unit operation,
performance, areas for improvement, and other information in accordance with the
approved Demonstration Plan.
Task III-8. Unit Decommissioning
- ---------------------------------
Upon the completion of a particular demonstration, the Contractor shall
perform the appropriate tasks as per the Demonstration Site Operating Agreement
developed in Task III-2.
Task III-9. Demonstration Report
- ---------------------------------
Upon completion of Phase III, the Contractor shall write an interim report
documenting the demonstration results, including a summary of the data collected
and the results of the analysis specified in the Demonstration Plan. The
Contractor shall submit the report to the NYSERDA Project Manager and NYSDEC.
(Results shall also be presented at the wrapup meeting, in accordance with Task
IV-2.)
PROJECT MANAGEMENT
Task I V-I. Progress Reports: The Contractor shall provide brief progress
reports once each month during the period that the work is performed, which
shall be submitted to the NYSERDA Project Manager and NYSDEC in duplicate no
later than the 15th of each following month. Progress Reports shall be in a
letter format and shall include the following subjects in the order indicated,
with appropriate explanation and discussion:
Title of project;
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Agreement number;
Reporting period;
Progress of project during the reporting period;
Identification of problems;
Planned solutions;
Schedule - percent or degree of tasks completed to date, critical path
analysis, and ability to meet contract schedule, reasons for slippage, and
path to recovery; and
Cost - analysis of actual cost incurred in relation to budget and progress
to date, and ability to complete project within contract budget.
The Contractor shall immediately notify the NYSERDA Project Manager of any
significant breakthroughs or problems. The Contractor shall, from time to
time after completion of the project, provide at the request of NYSERDA
data and information related to this project, including but not limited to
energy and environmental data, system deployments, technology spinoffs, job
creation, system limitations, and other information to assess the long-term
effectiveness of this project.
Task- IV-2. Meetings: The Contractor shall allow the NYSERDA Project
Manager or other designated NYSERDA personnel, and designated NYSDEC personnel,
to visit the facility to review work in progress on a non- interference basis,
at the request of the NYSERDA Project Manager. In addition, the Contractor
shall hold the following meetings as indicated in the schedule: Kickoff
Meeting, End-of-Phase Review Meetings, and a wrap-up meeting. The Contractor
shall schedule meetings at a time and place agreeable to the participants,
provide-of-Phase Review Meetings, and a wrap-up meeting. The Contractor shall
schedule meetings at a time and place agreeable to the participants, provide a
written agenda five days in advance of the meeting, and document each meeting
with minutes that shall be distributed to the project team members and other
attendees no later than 10 business days following the meeting. Invited
participants shall include the NYSERDA Project Manager and designated NYSDEC
personnel.
Task IV-3. Presentation of Results: Except for the Contractor's
proprietary and business sensitive data, the Contractor shall publicize the
technology and the results of the demonstration program in scientific journals
and conference proceedings, as well as trade shows, magazines, and on the world-
wide web, as appropriate. The Contractor shall work with the State, NYSERDA,
NYSDEC, and the operators/managers of each State or other facility involved in
the system demonstration to publicize and provide access to the general public,
to the extent possible.
Task IV-4. Final Report: The Contractor shall prepare a detailed final
report covering all of the work performed, except for information that would
impact the Contractor's competitive position. In particular, the report shall
provide the findings regarding potential air quality and energy benefits of
widespread deployment of the system, and shall identify appropriate applications
for the technology based on performance achieved in the demonstration program.
Four copies of the draft final report shall be submitted to the
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NYSERDA Project Manager in accordance with the schedule. NYSERDA and NYSDEC
shall provide their comments to the Contractor within 60 working days after
receipt of the draft. Within 30 working days after receipt of NYSERDA's and
NYSDEC's comments, the Contractor shall submit the Final Report, reflecting
NYSERDA's and NYSDEC's comments, to the NYSERDA Manager of Technical
Publications in conformance with the NYSERDA Report Format and Style Guide.
[Chart listing milestone payment and progress schedule is omitted pursuant to
Rule 406 under the Securities Act and has been filed separately with the
Securities and Exchange Commission]
[***]
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EXHIBIT B
REVISED 6/98
STANDARD TERMS AND CONDITIONS FOR ALL NYSERDA AGREEMENTS
(Based on Standard Clauses for New York State Contracts)
The parties to the attached agreement, contract, license, lease, amendment,
modification or other agreement of any kind (hereinafter, "the Agreement" or
"this Agreement") agree to be bound by the following clauses which are hereby
made a part of the Agreement (the word "Contractor" herein refers to any party
other than NYSERDA, whether a contractor, licensor, licensee, lessor, lessee or
any other party):
1. NON-DISCRIMINATION REQUIREMENTS. In accordance with Article 15 of the
Executive Law (also known as the Human Rights Law) and all other State and
Federal statutory and constitutional non-discrimination provisions, the
Contractor will not discriminate against any employee or applicant for
employment because of race, creed, color, sex, national origin, age, disability
or marital status. Furthermore, in accordance with Section 220-e of the Labor
Law, if this is an Agreement for the construction, alteration or repair of any
public building or public work or for the manufacture, sale or distribution of
materials, equipment or supplies, and to the extent that this Agreement shall be
performed within the State of New York, Contractor agrees that neither it nor
its subcontractors shall, by reason of race, creed, color, disability, sex or
national origin: (a) discriminate in hiring against any New York State citizen
who is qualified and available to perform the work; or (b) discriminate against
or intimidate any employee hired for the performance of work under this
Agreement. If this is a building service Agreement as defined in Section 230 of
the Labor Law, then, in accordance with Section 239 thereof, Contractor agrees
that neither it nor its subcontractors shall, by reason of race, creed, color,
national origin, age, sex or disability: (a) discriminate in hiring against any
New York State citizen who is qualified and available to perform the work; or
(b) discriminate against or intimidate any employee hired for the performance of
work under this contract. Contractor is subject to fines of $50.00 per person
per day for any violation of Section 220-e or Section 239 as well as possible
termination of this Agreement and forfeiture of all moneys due hereunder for a
second subsequent violation.
2. WAGE AND HOURS PROVISION. If this is a public work Agreement covered
by Article 8 of the Labor Law or a building service Agreement covered by Article
9 thereof, neither Contractor's employees nor the employees of its
subcontractors may be required or permitted to work more than the number of
hours or days stated in said statutes, except as otherwise provided in the Labor
Law and as set forth in prevailing wage and supplement schedules issued by the
State Labor Department. Furthermore, Contractor and its subcontractors must pay
at least the prevailing wage rate and pay or provide the prevailing supplements,
including the premium rates for overtime pay, as determined by the State Labor
Department in accordance with the Labor Law.
3. NON-COLLUSIVE BIDDING REQUIREMENT. In accordance with Section
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2878 of the Public Authorities Law, if this Agreement was awarded based upon the
submission of bids, Contractor warrants, under penalty of perjury, that its bid
was arrived at independently and without collusion aimed at restricting
competition. Contractor further warrants that, at the time Contractor submitted
its bid, an authorized and responsible person executed and delivered to NYSERDA
a non-collusive bidding certification on Contractor's behalf.
4. INTERNATIONAL BOYCOTT PROHIBITION. If this Agreement exceeds $5,000,
the Contractor agrees, as a material condition of the Agreement, that neither
the Contractor nor any substantially owned or affiliated person, firm,
partnership or corporation has participated, is participating, or shall
participate in an international boycott in violation of the Federal Export
Administration Act of 1979 (50 USC App. Sections 2401 et seq.) or regulations
thereunder. If such Contractor, or any of the aforesaid affiliates of
Contractor, is convicted or is otherwise found to have violated said laws or
regulations upon the final determination of the United States Commerce
Department or any other appropriate agency of the United States subsequent to
the Agreement's execution, such Agreement, amendment or modification thereto
shall be rendered forfeit and void. The Contractor shall so notify NYSERDA
within five (5) business days of such conviction, determination or disposition
of appeal. (See and compare Section 220-f of the Labor Law, Section 139-h of the
State Finance Law, and 2 NYCRR 105.4).
5. SET-OFF RIGHTS. NYSERDA shall have all of its common law and statutory
rights of set-off. These ri2hts shall include, but not be limited to, NYSERDA's
option to withhold for the purposes of set-off any moneys due to the Contractor
under this Agreement up to any amounts due and owing to NYSERDA with regard to
this Agreement, any other Agreement, including any Agreement for a term
commencing prior to the term of this Agreement. plus any amounts due and owing
to NYSERDA for any other reason including, without limitation, tax
delinquencies, fee delinquencies or monetary penalties relative thereto.
6. CONFLICTING TERMS. In the event of a conflict between the terms of the
Agreement (including any and all attachments thereto and amendments thereof) and
the terms of this Exhibit B, the terms of this Exhibit B shall control.
7. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New York except where the Federal supremacy clause requires otherwise.
8. NO ARBITRATION. Disputes involving this Agreement, including the
breach or alleged breach thereof, may not be submitted to binding arbitration
(except where statutorily required) without the NYSERDA's written consent, but
must, instead, be heard in a court of competent jurisdiction of the State of New
York.
9. SERVICE OF PROCESS. In addition to the methods of service allowed by
the State Civil Practice Law and Rules ("CPLR"), Contractor hereby consents to
service of process upon it by registered or certified mail, return receipt
requested. Service hereunder
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shall be complete upon Contractor's actual receipt of process or upon NYSERDA's
receipt of the return thereof by the United States Postal Service as refused or
undeliverable. Contractor must promptly notify NYSERDA, in writing, of each and
every change of address to which service of process can be made. Service by
NYSERDA to the last known address shall be sufficient. Contractor will have
thirty (30) calendar days after service hereunder is complete in which to
respond.
10. CRIMINAL ACTIVITY. If subsequent to the effectiveness of this
Agreement, NYSERDA comes to know of any allegation previously unknown to it that
the Contractor or any of its principals is under indictment for a felony, or has
been, within five (5) years prior to submission of the Contractor's proposal to
NYSERDA, convicted of a felony, under the laws of the United States or Territory
of the United States, then NYSERDA may exercise its stop work right under this
Agreement. If subsequent to the effectiveness of this Agreement, NYSERDA comes
to know of the fact, previously unknown to it, that Contractor or any of its
principals is under such indictment or has been so convicted, then NYSERDA may
exercise its right to terminate this Agreement. If the Contractor knowingly
withheld information about such an indictment or conviction, NYSERDA may declare
the Agreement null and void and may seek legal remedies against the Contractor
and its principals. The Contractor or its principals may also be subject to
penalties for any violation of law which may apply in the particular
circumstances. For a Contractor which is an association, partnership,
corporation. or other organization, the provisions of this paragraph apply to
any such indictment or conviction of the organization itself or any of its
officers, partners, or directors or members of any similar governing body, as
applicable.
11. PERMITS. It is the responsibility of the Contractor to acquire and
maintain, at its own cost, any and all permits, licenses, easements, waivers and
permissions of every nature necessary to perform the work.
12. PROHIBITION ON PURCHASE OF TROPICAL HARDWOOD . The Contractor
certifies and warrants that all wood products to be used under this Agreement
will be in accordance with, but not limited to, the specifications and
provisions of State Finance Law Section 165 (Use of Tropical Hardwoods), which
prohibits purchase and use of tropical hardwoods, unless specifically exempted
by NYSERDA.
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EXHIBIT C
REPORT FORMAT AND STYLE GUIDE
PURPOSE
This document explains how to prepare a technical report for the New York
State Energy Research and Development Authority (NYSERDA). It describes
editorial and production procedures and gives electronic data-transfer
information. NYSERDA's contractors prepare the reports describing NYSERDA
research and development projects that NYSERDA publishes. Please direct
questions about format and style to Paula Rosenberg of NYSERDA's Technical
Publications unit: (518) 862-1090, ext. 3270; fax (518) 862-1091 - e-mail
prlgnvserda.org
COPYRIGHTS
All material borrowed or adapted from other sources should be properly
identified (i.e., document, source, date, and page). The contractor must obtain
the copyright owner's written permission to use copyrighted illustrations,
tables, or substantial amounts of text from another publication.
REPORT FORMAT AND SEQUENCE
The following items are required in all technical reports and should be
paginated in the following sequence:
Title page (no page number)
Notice (no page number)
Abstract (iii)
Acknowledgments (optional) (iv)
Table of Contents including listings
of figures and tables (v or vii)
Summary (S- 1)
NOTE: the Abstract, Table of Contents, and each section begin on right-hand,
odd-numbered pages.
The following information is required (see sample on last page):
Report title and type of report (i.e., final, interim or summary) Name of
NYSERDA project manager(s) Corporate name, city, and state of contractor(s),
including contact person(s) or project manager(s) Project cosponsors, including
contact person(s) or project manager(s) Contract number (e.g., 3178-ERTER-MW-94)
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Notices
One of these legal notices or disclaimers is required:
When NYSERDA is the project's sole sponsor, this notice must be used:
NOTICE
This report was prepared by in the course of performing work contracted for
and sponsored by the New York State Energy Research and Development Authority
(hereafter "NYSERDA"). The opinions expressed in this report do not necessarily
reflect those of NYSERDA or the State of New York, and reference to any specific
product., service, process, or method does not constitute an implied or
expressed recommendation or endorsement of it. Further, NYSERDA, the State of
New York, and the contractor make no warranties or representations, expressed or
implied, as to the fitness for particular purpose or merchantability of product,
apparatus, or service, or the usefulness, completeness, or accuracy of any
processes, methods, or other information contained, described, disclosed, or
referred to in this report. NYSERDA, the State of New York, and the contractor
make no representation that the use of any product, apparatus, process, method,
or other information will not infringe privately owned rights and will assume no
liability for any loss, injury, or damage resulting from, or occurring in
connection with, the use of information contained, described, disclosed, or
referred to in this report.
When there are other project cosponsors, use the following notice instead:
NOTICE
This report was prepared by in the course of performing work contracted for
and sponsored by the New York State Energy Research and Development Authority
and the (hereafter the "Sponsors"). The opinions expressed in this report do not
necessarily reflect those of the Sponsors or the State of New York. and
reference to any specific product, service, process, or method does not
constitute an implied or expressed recommendation or endorsement of it. Further,
the Sponsors and the State of New York make no warranties or representations.
expressed or implied, as to the fitness for particular purpose or
merchantability of any product, apparatus. or service, or the usefulness,
completeness, or accuracy of any processes, methods, or other information
contained, described, disclosed, or referred to in this report. The Sponsors,
the State of New York, and the contractor make no representation that the use of
any product, apparatus, process, method, or other information will not infringe
privately owned rights and will assume no liability for any loss. injury, or
damage resulting from, or occurring, in connection with, the use of information
contained, described. disclosed, or referred to in this report.
Abstract and Key Words - right-hand, odd-numbered page [iii]. An abstract
is a brief, 200-word description of project objectives, investigative methods
used, and research
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conclusions or applications. This information will be used when NYSERDA
registers the report with the National Technical Information Service (NTIS). A
list of key words that describe the project and identify the major research
concept should be submitted with the report. Four to six precise descriptors are
generally sufficient and will be used for indexing, registering, and
distributing the report through NTIS.
Acknowledgments (optional) - left-hand, even-numbered page [iv]
Acknowledgments precede the contents and should be no longer than two
paragraphs.
Table of Contents and Lists of Figures and Tables - begin on odd-numbered,
right-hand pages [v. vii. ix, etc.]] The Table of Contents should list section
numbers, titles, second-level headings, and their page numbers. Third-level
headings also may be listed. If the report contains five or more figures or
tables, they should be listed using the style of the Table of Contents. The
following samples are boxed only to set them apart in this document.
Summary - right-hand, odd-numbered page entitled The Summary, which
immediately precedes the body of the text, should be written for a general
audience. The Summary may be the only part of the technical report closely read
by a number of people, many of whom lack a technical background. These may
include industry and utility executives, government officials, legislators. the
general public, and media representatives. The Summary should be 500-1000 words
long.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
SUMMARY................................................................ S-I
I DESCRIPTION OF STUDY................................................. 1-1
Sources of Information................................................. 1-5
Bases of Evaluation................................................... 1-9
2 EXISTING CONDITIONS.................................................. 2-1
Architecture........................................................... 2-3
Mechanical and Electrical Systems...................................... 2-13
3 ANALYSIS OF PRESENT ENERGY USE....................................... 3-1
Analysis of Use by Systems............................................. 3-3
</TABLE>
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<TABLE>
<S> <C>
Analysis of Use by Hospital Services..................................... 3-17
APPENDIX A Comparison of Expenses for NYS Hospitals...................... A-1
APPENDIX B Forms for Energy Audits in Hospitals.......................... B-1
FIGURES
Page
1-1 Comparative Energy Use Per Cubic Foot in Hospitals Under 200 Beds.... 1-2
2-1 View of Community Hospital from South................................ 2-1
2-2 Site Plan............................................................ 2.5
</TABLE>
GENERAL INFORMATION
The first reference to NYSERDA should read "the New York State Energy
Research and Development Authority (NYSERDA)." Subsequent references should
read simply "NYSERDA." When it is clear that you are referring to New York
State, use State; otherwise, use New York State or the State of New York.
COPY
9 Page format:
. Margins should be 1.25 inches left and right; 1 inch top and bottom.
. Use left-hand justification only.
. Text should be in a 10-point serif font (i.e., Times Roman, Bookman,
etc.); captions, tables, and figures should be in a sans-serif font
(i.e., Helvetica, Arial, etc.).
. Spacing should be 1.5 lines, printed on one side of the paper.
. Block-style paragraphs should be used, with no indentation (except for
fifth-level headings, which should be blocked on the left; see Heading
Styles, below).
. There should be two returns between a paragraph and the next heading.
Material borrowed or extracted from external sources must be identified by
document,
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source, date, and page). Written permission to use copyrighted illustrations,
tables. or text taken from another publication must be submitted with the
report.
Avoid half-page and one-sentence paragraphs.
Do not use contractions.
When referring to a specific figure or table, spell out and capitalize the
words "Figure" and "Table."
Indented lists of material should be set off with bullets:
. If a typographical bullet is unavailable, the bullet is a lower case
"o," not zero.
. One blank line should precede and follow a list.
. Bulleted items should be indented left and right.
All new sections should begin on a right-hand, odd-numbered page (e.g., 1-
1, 2-1, A-1, etc.).
. Percentages should be written as follows: 1%, 76%, etc.
. Acronyms must be spelled out the first time used, followed by the
acronym in parentheses.
HEADING STYLES
The heading styles illustrated below should be used. (Only section headings
should be numbered.)
FIRST-LEVEL HEADING
Section I
INTRODUCTION
The heading is upper case, centered, and boldfaced: the text is below the
heading at the left margin.
SECOND-LEVEL HEADING
The heading is upper case, at the left margin, and boldfaced: the text is
at the left margin.
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Third-Level Heading
The heading is upper and lower case, at the left margin, boldfaced and
underscored; the text is at the left margin.
Fourth-Level Heading.
The heading is upper and lower case, at the left margin, boldfaced, and
underscored. with a period at the end. The text continues on the same line as
the heading. The remaining text goes back out to the left margin.
Fifth-Level Heading.
The heading, is upper and lower case, indented, boldfaced, and underscored
with a period at the end. The text continues on the same line, with the
remaining text indented left and right.
TABLES AND FIGURES
Tables and figures must be numbered sequentially and titled individually.
Place tables and figures as close as possible to the text in which they are
mentioned.
Distinguish tabular material from the text.
Cite a source if the tabular material or figure content has not been
generated by the contractor.
Figure captions should be complete sentences when appropriate.
Use "Figure I," not "Fig. I," or "Table I." in the text, as well as for
captions. Examples:
. Table I details demand-side management options.
As shown in Figure 1, the demand-side management program offers numerous
options.
. Figure captions should be typed in boldface.
- Figure 1. Demand-Side Management Options in New York State.
. Unless generated by the contractor, a source should always be cited.
The figure source should appear after the caption (e.g., Source:
Lawrence Berkeley Laboratory); the table source should be noted with
an asterisk and footnoted.
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. Photographs and drawings should be limited in number, with the
following guidelines:
- Black-and-white line drawings or good-quality, clear halftones
(black-and-white photographs) may be used. Color artwork and
photos will be printed in black-and-white.
- Slides should be converted to black-and-white photos before being
submitted.
- Photographs should be printed on glossy stock, preferably 5"x7"
REFERENCES AND BIBLIOGRAPHIES
The format in Manual of Style (University of Chicago Press, Chicago.
Illinois) should be used for reference listings and bibliographies.
Bibliographic entries should be listed alphabetically by author, as
follows:
Hawkins, R.R. Scientific, Medical, and Technical Books Published in the
United States of America. 2d ed. New York: Bowker, 1958.
REPORT REQUIREMENTS
Two hard copies of the draft final report must be submitted to NYSERDA's
Manager of Technical Publications.
After review by the Project Manager and Technical Publications staff, the
draft will be returned to the contractor for final corrections. The contractor
is responsible for satisfactorily addressing technical comments from NYSERDA and
other co-funders. When making editorial corrections, the contractor must ensure
that technical content is not compromised.
After editorial corrections have been made, the contractor must submit two
hard copies of the final report (one a camera-ready original and the other a
photocopy) and the report on a PC-formatted computer diskette to NYSERDA'S
Manager of Technical Publications.
Diskette Requirements
Material must be submitted on an IBM personal computer-compatible 3.5-inch,
double-sided (DS), high-density (HD) diskette that has been formatted for 1.44
megabytes (MB) of storage.
A 3.5-inch IBM-PC-compatible diskette, double-sided, double-density,
formatted for 720 kilobytes is acceptable only when the above requirements
cannot be met.
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Textual material should be created in a format compatible with WordPerfect
6.1.While other word-processing programs may be able to be converted, results
may vary. Characteristics such as underlining, bold, italics, and many special
characters that often appear in equations may be lost if WordPerfect 6.1 is not
used. If you are unable to meet these electronic transfer requirements, before
submitting your report please contact Paula Rosenberg of NYSERDA's Technical
Publications unit at (518) 862-1090, ext. 3270; fax (518) 862-1091; e-mail
[email protected]
CITY OF LOCKPORT INFLUENT HYDROPOWER FEASIBILITY STUDY
Final Report
Prepared for
THE NEW YORK STATE ENERGY, RESEARCH AND DEVELOPMENT AUTHORITY Albany, NY
Lawrence J. Pakenas, P.E. Senior Project Manager
Prepared by,
CITY OF LOCKPORT Lockport, NY
Michael Die, Project Manager
and
INIALCOLM PIPUNIE, INC.
Buffalo, NY
Vincent J. Funipiello. P.E. Project Manager
Sample title page. Font is a serif font (Times Roman). Bold-faced text is 13
pt., small caps. The rest of the type is 11 pt., plain text.
4311 -ERTER-NfW-97
NYSERDA Report 98-11
July 1998
New York State Energy Research and Development Authority Technical Publications
Corporate Plaza West 286 Washington Avenue Extension Albany, New York 12203-6399
November 1998
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EXHIBIT D
PROMPT PAYMENT POLICY STATEMENT
Section 504.1 Purpose and applicability.
(a) The purpose of this Part is to implement section 2880 of the
Public Authorities Law by detailing NYSERDA's policy for making payment promptly
on amounts properly due and owing by NYSERDA under contracts. This Part
constitutes NYSERDA's prompt payment policy statement as required by that
section.
(b) This Part generally applies to payments due and owing by NYSERDA
to a person or business in the private sector under a contract it has entered
into with NYSERDA on or after May 1, 1988. This Part does not apply to payments
due and owing:
(1) under the Eminent Domain Procedure Law;
(2) as interest allowed on judgments rendered by a court
pursuant to any provision of law except Section 2880 of the Public Authorities
Law;
(3) to the Federal Government; to any state agency or its
instrumentalities, to any duly constituted unit of local government, including
but not limited to counties, cities, towns, villages, school districts, special
districts or any of their related instrumentalities or any other public
authority or public benefit corporation or to its employees when acting in, or
incidental to, their public employment capacity;
(4) if NYSERDA is exercising a legally authorized set-off
against all or part of the payment; or
(5) if other State or Federal law or rule or regulation
specifically requires otherwise.
Section 504.2 Definitions. As used in this Part, the following terms shall
have the following meanings, unless the context shall indicate another or
different meaning or intent:
(a) "NYSERDA" means the New York State Energy Research and
Development Authority.
(b) "Contract" means an enforceable agreement entered into between
NYSERDA and a contractor.
(c) "Contractor" means any person, partnership, private corporation,
or association:
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(1) selling materials, equipment or supplies or leasing property
or equipment to NYSERDA pursuant to a contract;
(2) constructing, reconstructing, rehabilitating or repairing
buildings, highways or other improvements for, or on behalf of, NYSERDA pursuant
to a contract; or
(3) rendering or providing services to NYSERDA pursuant to a
contract.
(d) "Date of payment" means the date on which NYSERDA requisitions a
check from its statutory fiscal agent, the Department of Taxation and Finance,
to make a payment.
(e) "Designated payment office" means the Office of NYSERDA's
Controller, located at Corporate Plaza West, 286 Washington Avenue Extension,
Albany, New York 12203-6399.
(f) "Payment" means provision by NYSERDA of funds in an amount
sufficient to satisfy a debt properly due and owing to a contractor and payable
under all applicable provisions of a contract to which this Part applies and of
law, including but not limited to provisions for retained amounts or provisions
which may limit NYSERDA's power to pay, such as claims, liens, attachments or
judgments against the contractor which have not been properly discharged, waived
or released.
(g) "Prompt payment" means a payment within the time periods
applicable pursuant to Sections 504.3 through 504.5 of this Part in order for
NYSERDA not to be liable for interest pursuant to Section 504.6.
(h) "Payment due date" means the date by which the date of payment
must occur, in accordance with the provisions of Sections 504.3 through 504.5 of
this Part, in order for NYSERDA not to be liable for interest pursuant to
Section 506.
(i) "Proper invoice" means a written request for a contract payment
that is submitted by a contractor setting forth the description, price or cost,
and quantity of goods, property or services delivered or rendered, in such form,
and supported by such other substantiating documentation. as NYSERDA may
reasonably require, including but not limited to any requirements set forth in
the contract; and addressed to NYSERDA's Controller, marked "Attention: Accounts
Payable." at the designated payment office.
(1) "Receipt of an invoice" means:
(i) if the payment is one for which an invoice is required,
the later of:
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(a) the date on which a proper invoice is actually
received in the designated payment office during normal business
hours; or
(b) the date by which, during normal business hours,
NYSERDA has actually received all the purchased goods, property or
services covered by a proper invoice previously received in the
designated payment office.
(ii) if a contract provides that a payment will be made on a
specific date or at a predetermined interval, without having to submit a
written invoice the 30th calendar day, excluding legal holidays, before the
date so specified or predetermined.
(2) For purposes of this subdivision, if the contract requires a
multifaceted, completed or working system, or delivery of no less than a
specified quantity of goods, property or services and only a portion of such
systems or less than the required goods, property or services are working,
completed or delivered, even though the Contractor has invoiced NYSERDA for the
portion working, completed or delivered, NYSERDA will not be in receipt of an
invoice until the specified minimum amount of the systems, goods, property or
services are working, completed or delivered.
(k) "Set-off" means the reduction by NYSERDA of a payment due a
contractor by an amount equal to the amount of an unpaid legally enforceable
debt owed by the contractor to NYSERDA.
Section 504.3 Prompt payment schedule. Except as otherwise provided by law
or regulation or in
Sections 504.4 and 504.5 of this Part, the date of payment by NYSERDA of an
amount properly due and owing under a contract shall be no later than 30
calendar days, excluding legal holidays, after such receipt.
Section 504.4 Payment procedures.
(a) Unless otherwise specified by a contract provision, a proper
invoice submitted by the contractor to the designated payment office shall be
required to initiate payment for goods, property or services. As soon as any
invoice is received in the designated payment office during normal business
hours, such invoice shall be date-stamped. The invoice shall then promptly be
reviewed by NYSERDA.
(b) NYSERDA shall notify the contractor within 15 calendar days after
receipt of an invoice of:
(1) any defects in the delivered goods, property or services;
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(2) any defects in the invoice, and
(3) suspected improprieties of any kind.
(c) The existence of any defects or suspected improprieties shall
prevent the commencement of the time period specified in Section 504.3 until any
such defects or improprieties are corrected or otherwise resolved.
(d) If NYSERDA fails to notify a contractor of a defect or
impropriety within the fifteen calendar day period specified in subdivision (b)
of this section, the sole effect shall be that the number of days allowed for
payment shall be reduced by the number of days between the 15th day and the day
that notification was transmitted to the contractor. If NYSERDA fails to provide
reasonable grounds for its contention that a defect or impropriety exists, the
sole effect shall be that the payment due date shall be calculated using the
original date of receipt of an invoice.
(e) In the absence of any defect or suspected impropriety, or upon
satisfactory correction or resolution of a defect or suspected impropriety,
NYSERDA shall make payment, consistent with any such correction or resolution
and the provisions of this Part.
Section 504.5 Exceptions and extension of payment due date. NYSERDA has
determined that, notwithstanding the provisions of Sections 504.3 and 504.4 of
this Part, any of the following facts or circumstances, which may occur
concurrently or consecutively, reasonably justify extension of the payment due
date:
(a) If the case of a payment which a contract provides will be made
on a specific date or at a predetermined interval, without having to submit a
written invoice, if any documentation, supporting data, performance
verification, or notice specifically required by the contract or other State or
Federal mandate has not been submitted to NYSERDA on a timely basis, then the
payment due date shall be extended by the number of calendar days from the date
by which all such matter was to be submitted to NYSERDA and the date when
NYSERDA has actually received such matter.
(b) If an inspection or testing period, performance verification,
audit or other review or documentation independent of the contractor is
specifically required by the contract or by other State or Federal mandate,
whether to be performed by or on behalf of NYSERDA or another entity, or is
specifically permitted by the contract or by other State or Federal provision
and NYSERDA or other entity with the right to do so elects to have such activity
or documentation undertaken, then the payment due date shall be extended by the
number of calendar days from the date of receipt of an invoice to the date when
any such activity or documentation has been completed, NYSERDA has actually
received the results of such activity or documentation conducted by another
entity, and any deficiencies identified or issues raised as a result of such
activity or documentation have been corrected or otherwise
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resolved.
(c) If an invoice must be examined by a State or Federal agency, or
by another party contributing to the funding of the contract, prior to payment,
then the payment due date shall be extended by the number of calendar days from
the date of receipt of an invoice to the date when the State or Federal agency,
or other contributing party to the contract, has completed the inspection,
advised NYSERDA of the results of the inspection, and any deficiencies
identified or issues raised as a result of such inspection have been corrected
or otherwise resolved.
(d) If appropriated funds from which payment is to be made have not
yet been appropriated or, if appropriated, not yet been made available to
NYSERDA, then the payment due date shall be extended by the number of calendar
days from the date of receipt of an invoice to the date when such funds are made
available to NYSERDA.
Section 504.6 Interest eligibility and computation. If NYSERDA fails to
make prompt payment, NYSERDA shall pay interest to a contractor on the payment
when such interest computed as provided herein is equal to or more than ten
dollars. Interest shall be computed and accrue at the daily rate in effect on
the date of payment, as set by the New York State Tax Commission for corporate
taxes pursuant to Section 1096(e)(1) of the Tax Law. Interest on such a payment
shall be computed for the period beginning on the day after the payment due date
and ending on the date of payment.
Section 504.7 Sources of funds to pay interest. Any interest payable by
NYSERDA pursuant to this Part shall be paid only from the same accounts, funds,
or appropriations that are lawfully available to make the related contract
payment.
Section 504.8 Incorporation of prompt payment policy statement into
contracts. The provisions' of this Part in effect at the time of the creation of
a contract shall be incorporated into and made a part of such contract and shall
apply to all payments as they become due and owing pursuant to the terms and
conditions of such contract, notwithstanding that NYSERDA may subsequently amend
this Part by further rulemaking.
Section 504.9 Notice of objection. Unless a different procedure is
specifically prescribed in a contract, a contractor may object to any action
taken by NYSERDA pursuant to this Part which prevents the commencement of the
time in which interest will be paid by submitting a written notice of objection
to NYSERDA. Such notice shall be signed and dated and concisely and clearly set
forth the basis for the objection and be addressed to the Vice President, New
York State Energy Research and Development Authority, Corporate Plaza West, 286
Washington Avenue Extension, Albany, New York 12203-6399. The Vice President of
NYSERDA, or his or her designee, shall review the objection for purposes of
affirming or modifying NYSERDA's action. Within 15 working days of the receipt
of the objection, the Vice President, or his or her designee, shall notify the
contractor either that NYSERDA's action is affirmed or that it is modified or
that, due to the complexity of the issue, additional
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time is needed to conduct the review; provided, however, in no event shall the
extended review period exceed 30 working days.
Section 504.10 Judicial Review. Any determination made by NYSERDA pursuant
to this Part which prevents the commencement of the time in which interest will
be paid is subject to judicial review in a proceeding pursuant to Article 78 of
the Civil Practice Law and Rules. Such proceedings shall be commenced upon
completion of the review procedure specified in Section 504.9 of this Part or
any other review procedure that may be specified in the contract or by other
law, rule, or regulation.
Section 504.11 Court action or other legal processes.
(a) Notwithstanding any other law to the contrary, the liability of
NYSERDA to make an interest payment to a contractor pursuant to this Part shall
not extend beyond the date of a notice of intention to file a claim, the date of
a notice of a claim, or the date commencing a legal action for the payment of
such interest, whichever occurs first.
(b) With respect to the court action or other legal processes
referred to in subdivision (a) of this section, any interest obligation incurred
by NYSERDA after the date specified therein pursuant to any provision of law
other than Public Authorities Law Section 2880 shall be determined as prescribed
by such separate provision of law, shall be paid as directed by the court, and
shall be paid from any source of funds available for that purpose.
Section 504.12 Amendments. These regulations may be amended by resolution
of NYSERDA, provided that the Chair, upon written notice to the other Members of
NYSERDA, may from time to time promulgate nonmaterial amendments of these
regulations.
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CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
Exhibit 10.19
A COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT
Between
PLUG POWER, L.L.C.
and
U. S. ARMY BENET LABORATORIES
A. Whereas, the Federal Technology Transfer Act of 1986, 15 USC3710a,
provides each Federal agency with the authority to permit the Directors of
Government-operated Federal Laboratories to enter into Cooperative Research and
Development Agreements (CRADA's) with Federal and non-Federal entities,
including private firms and organizations. This authority allows Federal
laboratories to accept, retain, and use funds, personnel, services, and property
from collaborating parties and to provided personnel services, and property to
collaborating parties. This authority also includes the disposition of patent
rights in any inventions, which may result from such collaboration, or by
delegation of the Assistant Secretary of the Army for Research, Development and
Acquisition, other patent rights which are owned by the Government.
B. Whereas, the U.S. Army BENET Laboratories (BENET) has an installation
and extensive state-of-the art infrastructure required to support an array of
unique technologies, in Armaments, Munitions and in enabling technologies.
BENET has the responsibility to make its procedures, processes and technologies
available for use and transfer to the private sector. BENET has unique
technologies and facilities in specialized materials, simulation and analysis
for prototype fabrication, which PLUG POWER desires to adapt for commercial
application.
C. Whereas, PLUG POWER, L.L.C. (PLUG POWER) desires to collaborate with
BENET in the business of research, development, and engineering for the purpose
of transferring unique process technologies from the United States Army for use
and application by PLUG POWER for a commercial application.
NOW, THEREFORE, the parties agree as follows:
Article 1. Definitions.
As used in this Agreement, the following terms shall have the following
meanings, and such meanings should be equally applicable to both the singular
and plural forms of the terms defined:
1.1 "Agreement" means this Cooperative Research and Development
Agreement.
1.2 "Invention" means any invention or discovery, which is or may be
patentable or otherwise protected, under Title 35 of the United States Code.
<PAGE>
1.3 "Made" in relation to any Invention means the conception or first
actual reduction to practice of such Invention.
1.4 "Proprietary Information" means any patent rights, copyrights,
trademark rights, trade secrets, mask works, proprietary information or data,
moral rights, and know-how developed by PLUG POWER prior to, in the course of or
subsequent to, this Agreement that: (i) is not generally known or available from
other sources without obligation concerning its confidentiality; (ii) has not
been made available by the owners to others without obligation concerning its
confidentiality; and (iii) is not already available to the Government without
obligation concerning its confidentiality, and does not constitute a Subject
Invention, Subject Data or Protected CRADA Information.
1.5 "Subject Data" means all recorded information first produced in the
performance of this Agreement.
1.6 "Subject Invention" means any invention made in the performance of
work under this Agreement.
1.7 "Protected CRADA Information" means any patent rights, copyrights,
trademark rights, trade secrets, mask works, proprietary information or data,
moral rights, and know-how, developed in the course of this Agreement and
directly related to the Statement of Work, by a BENET or PLUG POWER employee
assigned to this project by his or her employer.
Article 2. Cooperate Research.
2.1 Statement of Work. Cooperative research performed under this Agreement
shall be performed in accordance with the Statement of Work (SOW), incorporated
as a part of this Agreement as Appendix A. Each party agrees to participate in
the cooperative research and to utilize such personnel, resources, facilities,
equipment, skills, know-how and information, as it considers necessary,
consistent with its own policies, missions, and requirements. Work tasks will be
added to Statement of Work and will become part of this Agreement and recorded
as part of Appendix A. The work will be task-or-performance oriented.
2.2 Multiple Parties and Separate Technologies: BENET has unique
technologies in several related but distinct areas to include, but not limited
to: Mounts, Fire Control, and the enabling sciences and discipline. In
addition, BENET has expertise located within Watervliet Arsenal.
2.3 Review of Work. Periodic conferences shall be held between BENET
personnel and PLUG POWER personnel for the purpose of reviewing the progress of
the work. It is understood that the nature of this cooperative research is such
that completion within the limit of financial support allocated, cannot be
guaranteed. Accordingly, it is agreed that all sponsored research is to be
performed on a best efforts basis. It is agreed that individual work
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tasks incorporated into the Statement of Work will make use of project
management techniques detailing where appropriate, cost, schedule and technical
milestone considerations to mitigate and control risk.
2.4 Change in Scope. The parties shall make a good faith effort to agree
on any necessary changes to the SOW and make the changes by written notice. The
parties agree that increases and decreases in effort may by mutual agreement
not be considered a change in scope, minimizing administrative delays in the
execution of effort.
2.5 Research and Development (R&D) Team. To the extent that the conduct
of sponsored research requires a joint technical effort, PLUG POWER and BENET
agree to establish a joint research and development team (the "TEAM"). The Team
shall conduct cooperative research in accordance with the SOW. Each party shall
pledge to make available to the Team such resources, facilities, equipment,
skills, know-how, and information, as it considers necessary and appropriate.
Both parties pledge to support the Team in a mutually cooperative manner, on a
best effort basis, consistent with their respective policies, missions, and
requirements. Each party may support changes to the SOW or to the scope and
direction of the effort which, if agreed to by the other party, shall first be
made to the SOW, and then implemented by the Team. While assigned to the Team,
members shall continue to remain employed by their respective employers with
full benefits and salary, and will not be considered to be employees of the
other party for any reason. Each parties shall be solely responsible for the
composition their of Team members.
Article 3. Reports.
3.1 Progress Reports. After this Agreement enters into force, BENET and
PLUG POWER shall exchange periodic written reports during the term of this
Agreement on the progress of their work, and the results being obtained, and
shall make available to the extent reasonably requested, other project
information in sufficient detail to explain the progress of the work. Specific
report content and timing will be defined in the Statement of Work.
3.2 Final Report. BENET and PLUG POWER shall prepare a written report
within three (3) months after expiration of this Agreement. This report shall
set forth the technical progress made, identifying such problems as may have
been encountered, and establishing goals and objectives requiring further
effort. Inclusion of Proprietary Information or Subject Information in
deliverable reports shall be subject to the provisions of Article 7.2. In
addition, a portion of the results not including Proprietary Information, may be
prepared for publication in a journal or conference, as appropriate, by BENET or
PLUG POWER, with co-authorship, as appropriate, subject to the provisions of
7.4.
Article 4. Financial Obligation
Salary and Travel. BENET and PLUG POWER shall provide support to their
respective personnel in performance of this Agreement. Attached Statements of
Work set forth
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in Appendix A will detail financial terms and conditions. If or when appropriate
and required by a scope of work, reimbursement required by BENET will be
provided by PLUG POWER. It is noted that reimbursement does not constitute a
sale or transfer of ownership of property.
Article 5. Title to Property.
5.1 Equipment. All equipment first acquired under this Agreement, and
all Government Furnished Equipment (GFE), if any, shall be the property of BENET
except that title to items of equipment developed or purchased by PLUG POWER, or
provided to BENET by PLUG POWER or acquired by BENET with funds supplied by PLUG
POWER, shall remain or vest in PLUG POWER. ANY GFE shall be used solely for the
performance of the effort contemplated by this Agreement. Upon completion of
research under this Agreement, PLUG POWER shall be responsible for all costs
attendant to the maintenance, removal, storage, and shipping of their equipment
to their own facility. Prototype hardware, designed, produced and transferred by
the Government to PLUG POWER will be considered GFE, with the Government
retaining title. The applicable sections of Part 45 of the Federal Acquisition
Regulations shall apply to PLUG POWER's management and disposition of GFE
furnished under this Agreement.
5.2. Software
5.2.1. PLUG POWER Employee Software. Title to any copyright in
software written by PLUG POWER employees necessary to perform this Agreement
shall be held by PLUG POWER. PLUG POWER agrees to grant to the U.S. Government a
non-exclusive, irrevocable, paid-up license for military applications only, to
use or have used, throughout the world by, or on behalf of the U.S. Government,
the copyright covering said software.
5.2.2. Joint Employee Software. Title to any copyright in software
written jointly by BENET and PLUG POWER employees in the course of performance
of this Agreement, shall be held by PLUG POWER. PLUG POWER agrees to grant to
the U.S. Government a nonexclusive, irrevocable, paid-up license for military
applications only, to use or have used, throughout the world by, or on behalf of
the U.S. Government, the copyright covering said software.
5.2.3 Limited Scope. PLUG POWER shall retain ownership in any
software or algorithms to which PLUG POWER has title prior to this Agreement, or
written for its own requirements during the course of this Agreement which are
not necessary for the performance of work under this Agreement.
5.2.4. BENET Employee Software. The U.S. Government hereby grants to
PLUG POWER an exclusive, irrevocable, transferable, worldwide, paid-up license
to make, use or sell any software written by BENET employees in the performance
of this Agreement.
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5.2.5 BENET Laboratories may provide interface drawings and other
technical data to collaborators as required or negotiated for purposes other
than for production of Large Caliber Cannon. In this instance Cannon is defined
as consisting of the Cannon Tube, to include thermal management assembles, the
Breech, Mechanism, to include breech actuation assemblies, the Bore evacuator
and the Muzzle Break.
Article 6. Inventions and Patents.
6.1 Reporting. The parties shall promptly report to each other all Subject
Inventions made in the performance of work under this Agreement. All Subject
Inventions made in the performance of work under this Agreement shall be listed
in the Final Report required by this Agreement.
6.2 Employee Inventions. BENET, on behalf of the U.S. Government, agrees
that PLUG POWER shall retain title to any PLUG POWER employee Subject Invention.
PLUG POWER may file patent applications on such Subject Inventions at its own
expense. PLUG POWER further agrees to grant to the U.S. Government on PLUG POWER
Subject inventions a nonexclusive, irrevocable, paid-up license in the patents
covering a Subject Invention, to practice or have practiced, throughout the
world by, or on behalf of the U.S. Government, the Subject Inventions which are
covered by a resulting patent except for any application related to fuel cells.
Such non-exclusive license shall be evidenced by a confirmatory license
agreement prepared by PLUG POWER in a form satisfactory to BENET.
6.3. BENET Employee Inventions. BENET, on behalf of the U.S. Government,
shall have the initial option to retain title to, and file patents on, each
Subject Invention made by its employees. BENET may file patent applications
thereon at its own expense. BENET, on behalf of the U.S. Government, agrees to
grant to PLUG POWER on those BENET employee Subject Inventions upon which the
U.S. Government has exercised the option to retain title to, a nonexclusive,
irrevocable, transferable, paid-up license in the patents covering a Subject
Invention, to practice or have practiced, throughout the world by, or on behalf
of PLUG POWER, the Subject Inventions, which are covered by a resulting patent.
The license on Subject Inventions excludes the right to produce or have produced
Large Caliber Cannon at any facility other than Watervliet Arsenal.
6.4 Joint Employee Inventions. PLUG POWER have the initial option to file
patent applications at its own expense on joint inventions, subject to the
conditions specified in Paragraph 6.5. PLUG POWER is hereby granted all rights
to patents filed in its name for joint inventions for all applications related
to fuel cells, and the U.S. Government is hereby granted an exclusive,
irrevocable, paid-up U.S. Government license to practice or have practiced,
throughout the world by, or on behalf of the U.S. Government, the invention
which is covered by a resulting patent for all applications except those related
to fuel cell applications.
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6.5 Filing of Patent Applications. The party having the right to retain
title and file patent applications on a specific Subject Invention may elect not
to file patent applications, provided it so advises the other party within 300
days from the date it reports the Subject Inventions to the other party.
Thereafter, the other party may elect to file patent applications on the Subject
Invention and the party initially reporting the Subject Invention agrees to
assign its right, title, and interest in the Subject Invention to the other
party. The assignment of the entire right, title, and interest to the other
party, pursuant to this paragraph, shall be subject to the retention by the
party assigning title of a nonexclusive, irrevocable, transferable, paid-up
license to practice, or have practiced, the Subject Invention the world.
6.6 Patent Expenses. The expenses attendant to the filing of patent
applications shall be borne by the party filing the patent applications. Each
party shall provide the other party with copies of the patent applications it
files on any Subject Invention along with the power to inspect and make copies
of all documents retained in the official patent application files by the
applicable patent office. The parties agree to reasonably cooperate with each
other in the preparation and filing of patent applications resulting from this
Agreement.
6.7 Maintenance Fees. The fees payable to the U.S. Patent and Trademark
Office, in order to maintain the patent's enforcement, will be payable by the
owner of the patent, at that party's option. In the event that BENET is the
owner of the patent and PLUG POWER holds an exclusive license in said patent,
PLUG POWER shall pay all maintenance fees for said patent, but shall not be
required to pay any litigation fees for said patent. If deciding not to pay the
maintenance fee, PLUG POWER must relinquish their exclusive license rights in
said patent and must give BENET reasonable notification so as to permit BENET
the option of paying said fee. In the event that PLUG POWER elects not to pay
the maintenance fees and BENET elects to exercise it's option to pay said fee,
PLUG POWER will retain a non-exclusive, irrevocable, transferable, paid-up
license in said patent
6.8 Exclusive License
6.8.1 BENET, on behalf of the U.S. Government, agrees to grant
to PLUG POWER a limited term exclusive, transferable, worldwide license in each
U.S. patent application, and patents issued thereon, covering a BENET employee
Subject Invention, which is filed by BENET on behalf of the U.S. Government
subject to the reservation of a non-exclusive, irrevocable, paid-up license to
practice and have practiced the Subject Invention on behalf of the U.S.
Government.
6.8.2 Exclusive License Terms. PLUG POWER shall elect or decline
to exercise its rights to acquire a limited term exclusive license to any
Subject Invention(s) within six (6) months of being informed by BENET of the
Subject Invention(s). A reasonable royalty rate and other terms of license
shall be negotiated promptly in good faith and in conformance with the laws of
the United States. Such exclusive license shall be for an initial term ending
seven (7) years from the date of each patent and with respect to each such
patent shall be
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automatically renewable for successive seven (7) year periods provided PLUG
POWER or any PLUG POWER sublicensee:
(i) is then conducting related research, or
(ii) continues to commercialize the subject matter covered by
such patent(s).
6.8.3 Other BENET Inventions. This Agreement does not grant an implied
license to PLUG POWER with respect to any other government inventions, including
any BENET inventions not covered by Article 6.8.2. BENET agrees to grant an
exclusive, transferable, worldwide license to PLUG POWER to such other BENET
Inventions if requested by PLUG POWER at fair and reasonable terms, if such an
exclusive license is necessary for PLUG POWER to practice, or have practice, any
BENET Subject Invention under this Agreement, but only to the extent that BENET
has an unencumbered right and/or authority to do so. Nothing in this Agreement
shall be construed as a grant or an agreement to grant any license with respect
to any invention made by any other U.S. Army laboratory or any other Government
agency or laboratory.
6.8.4 Subsidiaries and Affiliates. The license to PLUG POWER under
this Agreement also extend to PLUG POWER's United States subsidiaries.
6.8.5 Other PLUG POWER Inventions. This Agreement does not grant an
implied license to BENET with respect to any other PLUG POWER inventions,
including any PLUG POWER inventions not covered by Section 6 of this Agreement.
PLUG POWER agrees to grant a nonexclusive, transferable, worldwide license to
BENET to such other PLUG POWER inventions if requested by BENET at fair and
reasonable terms, if such an nonexclusive license is necessary for BENET to
practice, or have practiced, any PLUG POWER Subject Invention under this
Agreement, but only to the extent that PLUG POWER has an unencumbered right
and/or authority to do so. Nothing in this Agreement shall be construed as a
grant or an agreement to grant any license with respect to any invention made by
PLUG POWER.
Article 7. Data and Publication
7.1 Rights. Subject Data shall be individually owned by the parties
hereto. Either party shall, upon request, have the right to review all Subject
Data first produced under this Agreement which has not been delivered to the
other party, except to the extent that such Subject Data is subject to a claim
of confidence or privilege by a third party.
7.2 Proprietary Information. BENET agrees that any Proprietary
Information furnished by PLUG POWER to BENET under this Agreement, or in
contemplation of this Agreement, shall be used, reproduced and disclosed by
BENET only for the purpose of carrying out this Agreement, and shall not be
released by BENET to third parties unless
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consent to the release is obtained from PLUG POWER. Proprietary Information
which is disclosed verbally by PLUG POWER shall be identified as proprietary at
the time of disclosure and then summarized in writing. Such summary shall be
marked as Proprietary information and provided to BENET within ten (10) days
after the verbal disclosure. PLUG POWER shall place a proprietary notice on all
information it delivers to BENET under this Agreement which it asserts is
proprietary. All Proprietary Information shall be protected for a period of five
(5) years from disclosure to BENET.
7.3 Release Restrictions. BENET shall have the right to use all Subject
Data for military purposes only, and shall not release such Subject Data
publicly except when: (i) BENET in reporting results of sponsored research, may
publish Subject Data in technical articles and other documents to the extent it
determines to be appropriate unless such disclosure will adversely affect PLUG
POWER's rights; and (ii) BENET may release such Subject Data where such release
is required by law or court order provided that prior notice is provided to PLUG
POWER to allow Plug POWER to obtain a Protective Order.
7.4 Publication. BENET and PLUG POWER agree to confer prior to the
publication of Subject Data to assure that no Proprietary Information or
protected CRADA information are released and that patent rights are not
jeopardized. Prior written approval is required from the other party before a
party hereto can submit a manuscript for review, which contains the results of
the research under this Agreement, or prior to publication if no such review is
made. Each party shall be offered an ample opportunity to review such proposed
manuscript and to file patent applications in a timely manner.
7.5 Obligations as to Protected CRADA Information. Each party hereto may
designate as Protected CRADA Information, as defined in Article 1, any Subject
Data produced by its employees, and with the agreement of the other party, mark
any Subject Data produced by the other party's employees. All such designated
Protected CRADA Information shall be appropriately marked.
For a period of five (5) years from the date Protected CRADA Information is
produced, the parties hereto agree not to further disclose such Protected CRADA
Information except:
(1) as necessary to perform this CRADA;
(2) as necessary for PLUG POWER to conduct its business;
(3) as necessary for BENET to provide to other Government facilities, and
only at those Government facilities with the same protection in place,
or
(4) as mutually agreed by the parties hereto in advance in writing.
The obligations of the parties with respect to Protected CRADA Information,
shall end sooner for any Protected CRADA Information which shall: (1) become
publicly known without fault
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of either party; (2) come into a party's possession without breach by that party
of the obligations set forth in this Article; or (3) be independently developed
by a party's employees who did not have access to the Protected CRADA
Information.
Article 8. Representations and Warranties.
8.1 Representations and Warranties of BENET. BENET hereby represents and
warrants as follows:
8.1.1 Organization. BENET is a federal laboratory and is wholly
owned by the Government of the United States and whose substantial purpose is
the performance of research, development, and engineering.
8.1.2 Mission. The performance of the activities specified by
this Agreement are consistent with the mission of BENET.
8.1.3 Authority. All prior reviews and approvals required by
regulations or law have been obtained by BENET prior to the execution of this
Agreement. The BENET official executing this Agreement has the requisite
authority to do so. Notwithstanding the delegation of authority to execute this
Agreement to the individual designated, that is the Director of BENET, the
Secretary of the Army has reserved to the Assistant Secretary of the Army
(Research, Development and Acquisition) the opportunity provided by 15 USC Sect.
3710a(c)(5)(A), to disapprove or require the modification of this Agreement
within 30 days of the date it is presented to him or her by BENET.
8.2. Statutory Compliance. The BENET Director, prior to entering into this
Agreement, has given special consideration to entering into CRADA's with small
business firms and consortia involving small business firms.
8.3 Representations and Warranties. PLUG POWER hereby represents and
warrants to BENET as follows:
8.3.1 POWER of Authority. PLUG POWER has the requisite power and
authority to enter into this Agreement- and to perform according to terms
thereof;
8.3.3 Due Authorization. PLUG POWER has taken all actions
required to be taken by law, to authorize the execution and delivery of this
Agreement;
8.3.4 No Violation. The execution and delivery of this Agreement
does not contravene any material provision of, or constitute a material default
under any material agreement binding on PLUG POWER or any valid order of any
court, or any regulatory agency or other body having authority to which PLUG
POWER is subject.
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Article 9. Termination.
9.1 Termination by Mutual Consent. PLUG POWER and BENET may elect to
terminate this Agreement, or portions thereof, at any time by mutual consent.
9.2 Termination by Unilateral Action. Either party may unilaterally
terminate this entire Agreement at any time by giving the other party written
notice, no less than 30 days prior to the desired termination date. Termination
will consider any work in process and the financial effects on the parties.
9.3 Termination Procedures. In the event of termination, the parties
shall specify by written notice the disposition of all property, patents, and
other results of work accomplished or in progress, arising from or performed
under this Agreement. Upon the receipt of written termination notice, the
parties shall not take any new commitments that relate to this Agreement.
Article 10. Disputes.
10.1 Settlement. Any dispute arising under this Agreement which is not
disposed of by agreement of the co-principal investigators, shall be submitted
jointly to the signatories of this Agreement. A joint decision of the
signatories or their designees shall be the disposition of such dispute.
However, nothing in this section shall prevent any party from pursuing any and
all administrative and/or judicial remedies, which may be allowable.
Article 11. Liability.
11.1 Property. Neither party shall be responsible for damages to any
property provided to, or acquired by, the other party pursuant to this
Agreement.
11.2 PLUG POWER Employees. PLUG POWER agrees to indemnify and hold
harmless the U.S. Government for any loss, claim, damage, or liability of any
kind involving any employee of PLUG POWER arising in connection with this
Agreement, except to the extent that such loss, claim, damage, or liability is
due to the negligence of BENET under the provision of the Federal Torts Claims
Act.
11.3 No Warranty. Except as specifically stated elsewhere in this
Agreement, BENET makes no express or implied warranty as to any matter
whatsoever, including the conditions of the research or any invention or
product, whether tangible or intangible; made, or developed under this
Agreement, or the ownership, merchantability, or fitness for a particular
purpose of the research or any invention or product.
11.4 Product and Other Liability as to the U.S. Government. PLUG POWER
holds the U.S. Government harmless and indemnifies the U.S. government for all
liabilities, demands, damages, expenses, and losses arising out of use by PLUG
POWER of BENET's
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research and technical developments or out of any use, sale, or other
disposition by PLUG POWER of products made by the use of BENET's technical
developments.
11.5 Indemnification. The U.S. government and PLUG POWER makes no express
or implied warranty as to the conditions of the research or any intellectual
property or product made, or developed under this Agreement, or the ownership,
merchantability or fitness for a particular purpose of the research or resulting
product. Neither the U.S. Government or PLUG POWER shall be liable for special,
consequential, or incidental damages.
Article 12. Miscellaneous
12.1 No benefits. No member of, or delegate to the United States
congress, or resident commissioner, shall be admitted to any share or part of
this Agreement, nor to any benefit that may arise therefrom; but this provision
shall not be construed to extend to this Agreement, if made with a corporation
for its general benefit.
12.2 Governing Law. This Agreement shall be governed by the laws of the
United States Government.
12.3. Fair Access. This Agreement shall not restrict either party from
entering into similar agreements.
2.4.a Notices. All notices pertaining to or required by this Agreement,
shall be in writing and shall be signed by an authorized representative, and
shall be delivered by hand or sent by certified mail, return receipt requested,
with postage prepaid.
2.4.b Independent Contractors. The relationship of PLUG POWER to BENET/to
this Agreement is-that of independent contractors and not as agents of-each or
as joint ventures or partners.
12.5 Use of Name or Endorsement: (i) PLUG POWER shall not use the name of
BENET, BENET Laboratories, Watervliet Arsenal or the Department of the Army, on
any product or service which is directly or indirectly related to either this
Agreement or any patent license or assignment agreement, which implements this
Agreement without the prior approval of BENET; (ii) by entering into this
Agreement, BENET does not directly or indirectly endorse any product or service
provided, or to be provided, by PLUG POWER, its successors, assignees, or
licensees. PLUG POWER shall not in any way imply that this Agreement is any
endorsement of such products or service.
12.6 The rights specified in provision of this Agreement covering
Inventions and Patents", "Exclusive License", "Data and Publication", "Product
and Other Liability as to the U.S. Government" and "Indemnification" shall
survive the termination or expiration of this Agreement.
11
<PAGE>
Article 13. Duration of Agreement and Effective Date
13.1 Expiration of Agreement. This Agreement will automatically expire on
1 December 2003, unless it is revised by written notice and mutual consent.
13.2 Effective Date. This Agreement shall enter into force as of the date
it is signed by -the last authorized representative of the parties.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized representatives as follows:
For: PLUG POWER, L.L.C.
/s/ Gary Mittleman
-------------------------------------
Gary Mittleman
President and Chief Executive Officer
Date:_______________________
For: BENET and the U.S. Government
/s/ Russell Fiscella
-------------------------------------
Mr. Russell Fiscella
Acting Director
US Army BENET Laboratories
Date:_______________________
12
<PAGE>
APPENDIX A
STATEMENT OF WORK (SOW)
The overall purpose of this CRADA is for PLUG POWER, L.L.C. to acquire from the
US Army BENET Laboratories unique technology and services which will be applied
by PLUG POWER for commercial applications.
PLUG POWER desires to work with scientists and engineers of BENET to develop and
commercialize new and innovative energy products. BENET scientists have unique
knowledge in simulation and analysis, design and the application of- advanced
materials. PLUG POWER is engaged in a commercial enterprise, which can apply
BENET's technology to enhance product functionality, reliability and durability.
This Agreement does not commit PLUG POWER to any expenditure of funds. Detailed
work tasks and associated costs will be agreed to by the parties in advance of
commencing work. Increases or decreases to this Agreement will be accomplished
by a written amendment to this statement of Work, authorized by representatives
of both PLUG POWER and BENET.
13
STATEMENT OF WORK
Modification Number 001
Composite Plate Development
Version 1.0
January 12, 1998
Background:
PLUG POWER is investigating the use of [***] materials for commercial
fabrication of PEM Fuel cell plates. [***] can potentially offer the following
benefits:
. Low weight
. Low piece cost
. Corrosion resistance
. Higher volume capability
. Established manufacturing process and infrastructure
. Ability to attain elaborate geometric features
PLUG POWER has developed certain requirements and designs for the
composition and geometry of composite plates and is progressing toward their
development and eventual commercialization.
PLUG POWER seeks to discover the material composition and molding process
best suited for these composite plates. A successful composite plate design will
have to attain acceptable [***] and [***] properties.
Short Term Test Plan
1 - To mold blocks of various material compositions for subsequent material
property testing
a. BENET Labs will fabricate a [***] simple mold plate.
b. BENET Labs will use the mold plate to mold 4 plates from each of the
following 6 composition formulas:
<TABLE>
<CAPTION>
MIX 1 MIX 2 MIX 3 MIX 4 MIX 5 MIX 6
- -------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
[***] [***] [***] [***] [***] [***] [***]
- -------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
- -------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
- -------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
- -------------------------------------------------
</TABLE>
c. Determine physical properties of the molded plates.
d. PLUG POWER will perform [***] tests on the plates.
e. BENET Labs will perform [***] testing on the plates including such tests
as [***].
f. BENET Labs will deliver to PLUG POWER all fabricated plates and test
results.
STATEMENT OF WORK
Modification Number 001
Composite Plate Development
Version 1.0
January 12, 1998
2 - hold Plates using the material selected in the block testing
a. PLUG POWER will fabricate low production volume molds.
b. BENET Labs will use the PLUG POWER supplied molds to fabricate at least
04 plates using a PLUG POWER specified material formulation.
c. BENET Labs will perform requested [***] measurements of the formed
plates.
d. PLUG POWER will test plates and identify areas of improvement.
e. BENET Labs will deliver to PLUG POWER all fabricated plates and test
results.
STATEMENT OF WORK
Modification Number 001
Estimate of required time and materials
Version 1.0
January 15,1998
BENET Laboratories will assist PLUG POWER in investigating the use of [***]
for commercial fabrication of PEM fuel cell plates.
Reference PLUG POWER "[***] and Testing Version 1.0 Dated January 12,
1998." The following is an estimate of time and material costs required by BENET
Laboratories to perform the work.
<TABLE>
<CAPTION>
Task ID Task Name Materials Labor Estimate
- ------- --------------------- --------- --------------
<S> <C> <C> <C>
2 Generate [***] mold drawing $ [***] [***]
3 Fabricate [***] mold $ [***] [***]
4 Procure Materials $ [***] [***]
5 Mold [***] trial plate $ [***] [***]
6 Mold [***] plates $ [***] [***]
7 Fabricate Property $ [***] [***]
Specimens
8 Perform property tests $ [***] [***]
9 Specify property tests $ [***] [***]
10 Procure mold materials $ [***] [***]
12 Generate final mold drawings $ [***] [***]
13 Fabricate final molds $ [***] [***]
14 Inspect molds (WVA) $ [***] [***]
15 Mold Final plates $ [***] [***]
16 Inspect final plates (WVA) $ [***] [***]
Total labor [***]
Labor rate $ [***]
Total Labor $ [***]
Total Material $ [***]
Grand Total $ [***]
</TABLE>
Expenditures in excess of $ [***] by BENET Laboratories shall not be
reimbursable unless authorized in advance by a written amendment to this
Modification No. 1, executed by a representative of PLUG POWER.
Approvals to Commence Work:
For PLUG POWER: For BENET Laboratories
___________________________ ________________________________
___________________________ ________________________________
STATEMENT OF WORK
Modification Number 001
Composite Plate Development
Version 1.0
January 12,1998
Background:
PLUG POWER is investigating the use of [***] materials for commercial
fabrication of PEM Fuel cell plates. [***] can potentially offer the following
benefits:
PLUG POWER has developed certain requirements and designs for the composition
and geometry of [***] and is progressing toward their development and eventual
commercialization.
PLUG POWER seeks to discover the material composition and molding process best
suited for these composite plates. A successful composite plate design will have
to attain acceptable [***] and [***] properties.
Short Term Test Plan
1 - To mold blocks of various material compositions for subsequent material
property testing
a. BENET Labs will fabricate a [***] simple mold plate.
b. BENET Labs will use the mold plate to mold [***] plates from each of the
following 6 composition formulas:
<TABLE>
<CAPTION>
MIX 1 MIX 2 MIX 3 MIX 4 MIX 5 MIX 6
- -------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
[***] [***] [***] [***] [***] [***] [***]
- -------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
- -------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
- -------------------------------------------------
[***] [***] [***] [***] [***] [***] [***]
- -------------------------------------------------
</TABLE>
c. Determine physical properties of the molded plates.
d. PLUG POWER will perform conductivity and permeability tests on the
plates.
e. BENET Labs will perform mechanical testing on the plates including such
tests as strength, toughness, creep, thermal expansion, and thermal
conductivity.
f. BENET Labs will deliver to PLUG POWER all fabricated plates and test
results.
STATEMENT OF WORK
Modification Number 001
Composite Plate Development
Version 1.0
January 12, 1998
2 - Mold Plates using the material selected in the block testing
a. PLUG POWER will fabricate low production volume molds.
b. BENET Labs will use the PLUG POWER supplied molds to fabricate at least
[***] plates using a PLUG POWER specified material formulation.
c. BENET Labs will perform requested geometric and surface measurements of
the formed plates.
d. PLUG POWER will test plates and identify areas of improvement.
e. BENET Labs will deliver to PLUG POWER all fabricated plates and test
results.
STATEMENT OF WORK
Modification Number 002
Plate Corrosion Investigation
Version 1.0
February 17, 1998
Background:
PLUG POWER is investigating the cause(s) of corrosion witnessed on fuel
cell plates. Although the plates are fabricated from [***], a significant amount
of "contamination" has been found on certain areas of cell plates. To ensure
reliable fuel cell operation, the source(s) of this "contamination" must be
identified and mitigated.
PLUG POWER consequently seeks to enlist the assistance of BENET
Laboratories to determine the origins and causes of this observed
"contamination."
Scope of Work
BENET Laboratories personnel will utilize a variety of their metallurgical
examination techniques, failure analysis skills, and analysis equipment to
identify the species and causes of the observed contamination.
a. PLUG POWER will provide to BENET Labs several contaminated fuel cell
plates along with water samples and other components required to
facilitate the investigation.
b. PLUG POWER will familiarize BENET Labs personnel in the various
functional aspects of the contaminated plates to permit comprehensive
understanding of the potential corrosion mechanisms.
c. BENET Labs will inspect the plates using non-destructive techniques in
an effort to determine the origins and causes of the plate
contamination.
d. Only after receiving permission from PLUG POWER will BENET Labs be
permitted to perform destructive examinations of the fuel cell plates.
e. BENET Labs will provide interim reports of findings on an as required
basis.
f. BENET Labs will deliver to PLUG POWER an informal final of findings,
along with all plate samples and associated materials upon completion of
the investigation.
STATEMENT OF WORK
Modification Number 002
Estimate of required time and materials
Version 1.0
January 15, 1998
BENET Laboratories will assist PLUG POWER in investigating the causes of
contamination found on fuel cell plates.
Reference PLUG POWER "Plate Corrosion Investigation Version 1.0 Dated February
17, 1998." The following is an estimate of time and material costs required by
BENET Laboratories to perform the work.
<TABLE>
<CAPTION>
Task ID Task Name Materials Labor Estimate
- ------- --------- --------- --------------
<S> <C> <C> <C>
1 Analyze plates and write report $ [***] [***]
Total Labor [***]
Labor rate $ [***]
Total Labor $ [***]
Total Material $ [***]
Grand Total $ [***]
</TABLE>
Expenditures in excess of $[***] by BENET Laboratories shall not be reimbursable
unless authorized in advance by a written amendment of this Modification No. 2,
executed by a representative of PLUG POWER
Approvals to Commence Work:
For PLUG POWER: For BENET Laboratories
___________________________ ____________________________________
Date:______________________ Date:_______________________________
STATEMENT OF WORK
Modification Number 003
Estimate of required time and materials
Version 1.0
February 18, 1998 (modified 20 Feb 98; BENET estimates added)
BENET Laboratories will assist PLUG POWER in analyzing components of the [***]
test fuel cell.
Reference PLUG POWER "[***] Test Study, Version 1.0 Dated February 18, 1998."
The following is an estimate of time and material costs required by BENET
Laboratories to perform the work.
<TABLE>
<CAPTION>
Task ID Task Name Materials Labor Estimate
- --------- ---------------------------------- --------- --------------
<S> <C> <C> <C>
1 Support and witnessing disassembly $[***] [***]
2 Analysis of Water Samples $[***] [***]
3 Analysis of Hardware Components $[***] [***]
Total Labor [***]
Labor rate $[***]
Total Labor $[***]
Total Material $[***]
Grand Total $[***]
</TABLE>
Expenditures in excess of $[***] by BENET Laboratories shall not be reimbursable
unless authorized in advance by a written amendment to this Modification No. 3,
executed by a representative of PLUG POWER
Approvals to Commence Work:
For PLUG POWER: For BENET Laboratories
___________________________________ ________________________________
Date:______________________________ Date:_______________________________
STATEMENT OF WORK
Modification Number 003
[***] Test Study
----------------
Version 1.0
February 18, 1998 (modified 20 Feb 98; BENET estimates added)
Background:
PLUG POWER is investigating the effects of [***] on fuel cell components. To
begin the study, PLUG POWER will be conducting a series of [***] long tests
[***]. Each fuel cell will be operated under controlled conditions, and
periodically monitored for electrical performance. Additionally, water samples
from the fuel cell exhaust ports will be gathered on a periodic basis. At the
conclusion of the [***], the fuel cell will be disassembled and inspected for a
variety of mechanical, and electrochemical attributes. PLUG POWER wishes to
enlist the assistance of BENET Laboratories in performing metallurgical and
other physical analysis procedures.
Scope of Work
Following the conclusion of the first [***] test, PLUG POWER will disassemble
the fuel cell. Components of the fuel cell, and a collection of water samples
will be delivered to BENET Laboratories personnel for their examination and
analysis as described below.
Part 1 - Support and witnessing of the disassembly
a. BENET laboratory personnel will attend the disassembly of the [***]
test cell. By witnessing the disassembly, they will gain better
first-hand knowledge of the condition of the assembly, and be able
to advise potential analysis options on a "real-time" basis.
b. PLUG POWER will provide to BENET labs the following:
1 - Water samples as defined below
2 - Two reactant flow field plates (anode and cathode)
Part 2 - Analysis of Water samples
a. BENET Labs personnel will analyze water samples provided to them by
PLUG POWER for chemical content. The samples will consist of:
1 - [***]
2 - [***]
3 - [***]
4 - [***]
Using appropriate techniques, BENET personnel will test each water
sample for evidence of [***]. [***] will also be documented.
Part 3 - Analysis of hardware components
a. BENET Labs personnel will inspect the reactant flow field plates
using non-destructive techniques in an effort to determine the
origins and causes of any potential plate contamination. Plates will
be provided to BENET Labs with components attached, and careful
disassembly will be required. Plug Power will provide disassembly
guidance as required. Photographs of the plates should be made
documenting any areas of interest during the disassembly process.
b. BENET Labs personnel will inspect the plates and components for
unusual conditions (i.e., corrosion, pitting, stains, etc.) as
required, using electron microscopic and other surface examination
techniques.
c. BENET Labs will provide interim reports of findings on an as
required basis.
d. BENET Labs will deliver to PLUG POWER an informal final report of
findings, along with all plates and materials upon completion of the
investigation.
STATEMENT OF WORK
Modification Number 004
[***] STUDY
Version 2.0
June l, 1998
(Revised per May 29, 1998 Meeting)
Background:
PLUG POWER is investigating the effects of [***] on fuel cell components. To
begin the study, PLUG POWER will be conducting a series of [***], long tests of
[***] fuel cells. Each fuel cell will be operated under controlled conclusions,
and periodically monitored for electrical performance. At the conclusion of the
[***], the fuel cell will be disassembled and inspected for a variety of
mechanical, and electrochemical attributes. PLUG POWER wishes to enlist the
assistance of BENET Laboratories in performing chemical analysis procedures on
the [***], and [***] components of one such test cell.
Scope of Work
Following the conclusion of the first [***] test, PLUG POWER will disassemble
the fuel cell. Components of the fuel cell. ([***] material will be delivered
to BENET Laboratories personnel for their examination and analysis as described
below.
Part 1 - [***] Level Analysis of the [***]
a. BENET laboratory personnel will utilize [***] (or other appropriate)
techniques to analyze the content of [***] supplied by PLUG POWER. Each
sample must be properly [***]. All examples must be [***]. The
instrument must be calibrated to include the expected level of [***] for
the samples.
b. PLUG POWER will provide to BENET labs the following:
1- Two (2) sample [***] each reassuring approximately [***]. The
total expected [***]. And the total expected [***] on each
sample. One sample is labeled the "Control" [***], and the
second [***] is labeled the Test Sample."
Part 2 - [***] Analysis
a. Sub-task a. is no longer needed and has been deleted.
b. Sub-task b. is no longer needed and has been deleted.
c. BENET Labs personnel will then determine the weight of [***] present in
each sample of the [***] provided by PLUG POWER.
d. PLUG POWER will provide to BENET labs the following:
1 - [***] labeled "[***]."
2 - [***] labeled "[***]."
3 - [***] labeled "[***]."
STATEMENT OF WORK
Task Number 005
WATER SAMPLE ANALYSIS
August 10, 1998
Background:
PLUG POWER is developing PEM fuel cell systems for residential application. In
this work, water samples will be collected and analyzed at various locations in
a residential fuel cell system to identify contamination sources in water.
Scope of Work
Plug Power will provide BENET lab with the following water samples for [***] and
[***] analysis
1. Plug Power [***] water
2. [***] water from the [***]
3. [***] in the [***]
4. water from [***]
5. water from the [***] in the [***]
6. [***] water
[***] should be used for [***] analysis, while [***] should be used for [***]
analysis
STATEMENT OF WORK
Task Number 005
ESTIMATE OF REQUIRED TIME AND MATERIALS
August 10, 1998
BENET Laboratories Will assist PLUG POWER in analyzing the water samples
provided. The following is an estimate of time and material costs required by
BENET Laboratories to perform the work.
<TABLE>
<CAPTION>
Task ID Task Name Materials Labor Estimate
- --------- --------- --------- --------------
<S> <C> <C> <C>
0 [***] [***] [***]
1 [***] [***] [***]
Total Labor [***]
Labor rate $[***]
Total Labor $[***]
Total Material $[***]
Grand Total $[***]
</TABLE>
Expenditures in excess of $[***] by BENET Laboratories shall not be reimbursable
unless authorized in advance by a written amendment to this Statement of Work,
Task Number 5, executed by a representative of PLUG POWER.
Approvals to Commence Work:
For PLUG POWER: For BENET Laboratories
_________________________ ________________________
Date:____________________ Date:____________________
STATEMENT OF WORK
Mod. 6 & 7
Composite Plate Development
Version 1.0
June 9,1998
Background:
Plug power is investigating the use of conductive composite materials for
commercial fabrication of PEM Fuel Cell plates. Composite plates can potentially
offer the following benefits:
Plug Power plans to test and fabricate several fuel cell stacks composed of
[***]. Much research has been spent exploring which material compositions and
molding processes are best suited for [***]. The [***] design must incorporate
acceptable [***] and [***] in order to function in a fuel cell stack. The
information that has been gathered to date will be utilized to mold a) several
small fuel cell stacks for testing purposes and b) a final [***] stack for
automotive testing in late August.
Scope of Work:
1. Replicate LANL's latest material mix:
a. Benet Laboratories will set-up press
b. Benet Laboratories will mold [***] using the latest LANL recipe
2. Mold sample plates using- LANL's latest mix:
a. Benet Laboratories will use large plate mold supplied by Plug Power to
mold sample plate at [***]
b. Benet will measure [***] on molded samples
c. Benet Laboratories will perform [***] and [***] measurements to ensure
compatibility between [***] and drawings provided. [***]
3. Molding of [***] plates for testing in final [***] fuel cell stack.
a. Benet Laboratories will mix the necessary materials based on
compositions and procedure requested.
b. Benet Laboratories will post-cure the molded plates for the required
time to eliminate any material leakage after delivery to Plug Power.
c. Benet laboratories will mold [***] with surface and material
consistencies allowing them to be placed in final working fuel cell
stack.
STATEMENT OF WORK
Estimate of required time and materials
Version 1.0
June 9, 1998
<TABLE>
<CAPTION>
Task ID Task Name Materials Labor Estimate
- --------- ------------------------ --------- --------------
<S> <C> <C> <C>
1 Replicate LANL's latest material
mix $[***] [***]
2 Mold Sample [***] Plates $[***] [***]
3 Mold [***] Plates $[***] [***]
Total Labor [***]
Labor rate $[***]
Total Labor $[***]
Total Material $[***]
Grand Total $[***]
</TABLE>
Expenditures in excess of $[***] by BENET Laboratories shall not be reimbursable
unless authorized in advance by a written amendment to this Modification,
executed by a representative of PLUG POWER.
Approvals to Commence Work:
For PLUG POWER: For BENET Laboratories
___________________________ _______________________
Date:_____________________ Date:___________________
STATEMENT OF WORK
Task Number 008
ANALYSIS of MEA Surface Contamination
September 24, 1998
Background:
PLUG POWER is developing a series of high performance fuel cell MEAs for
automotive applications. In this work, Plug Power has observed a build up of
foreign matter within fuel cell stacks over a period of time. Plug Power wishes
to get a better understanding of how these foreign materials are deposited onto
the membrane surfaces.
Scope of Work
Plug Power will provide Benet Labs with 20 samples of membranes with that
have been operated within fuel cells for various periods of time. Plug Power
wishes to have an analysis performed on these samples for the following [***].
Additionally, Plug Power wishes [***] for: [***]
The membranes will be scanned in plane and section. Sectional views will
be mounted in plastic and polished. Pictures and trace-scans will be taken for
each scan.
Plug Power Contact
Uriel Oko, 782-7700, Ext. 209
STATEMENT OF WORK
Task Number 008
ESTIMATE OF REQUIRED TIME AND MATERIALS
September 24, 1998
BENET Laboratories will assist PLUG POWER in analyzing material from fuel
cells for the presence of various [***] build-ups on [***]
<TABLE>
<CAPTION>
Task ID Task Name Materials Labor Estimate
- ------- ----------------- --------- --------------
<S> <C> <C> <C>
1 2 scans (w/pictures & trace scans) per [***]
sample (Total of 20 samples x 3 hours/
sample)
Total Labor [***]
Labor rate $[***]
Total Labor $[***]
Total Material $[***]
Grand Total $[***]
</TABLE>
Expenditures in excess of $[***] by BENET Laboratories shall not be
reimbursable unless authorized in advance by a written amendment to this
Statement of Work, Task Number 8, executed by a representative of PLUG POWER.
Plug Power Project Number: 89,91-47011-200
Approvals to Commence Work:
For PLUG POWER: For BENET Laboratories
________________________________ ________________________________
Date:___________________________ Date:_______________________________
STATEMENT OF WORK
Modification Number 004
ESTIMATE OF REQUIRED TIME AND MATERIALS
Version 1.0
February 18, 1998
BENET Laboratories will assist PLUG POWER in analyzing components of the
[***] test fuel cell.
Reference PLUG POWER "[***] Study, Version 1.0 Dated March 2, 1998." The
following is an estimate of time and material costs required by BENET
Laboratories to perform the work.
<TABLE>
<CAPTION>
Task ID Task Name Materials Labor Estimate
- ------------------ ----------------------------- ----------- --------------
<S> <C> <C> <C>
1 [***] level analysis $ [***] [***]
2 [***] analysis $ [***] [***]
3 Additional water sample tests $ [***] [***]
Total Labor [***]
Labor rate $[***]
Total Labor $[***]
Total Material $[***]
Grand Total $[***]
</TABLE>
Expenditures in excess of $[***] by BENET Laboratories shall not be
reimbursable unless authorized in advance by a written amendment of this
Modification No. 4, executed by a representative of PLUG POWER
Approvals to Commence Work:
For PLUG POWER: For BENET Laboratories
___________________________ ________________________________
Date:______________________ Date:_______________________________
<PAGE>
STATEMENT OF WORK
Modification Number 003 Estimate of required time and materials
Version 1.0
February 18, 1998 (modified 20 Feb 98; Benet estimates added)
BENET Laboratories will assist PLUG POWER in analyzing components of the [***]
test fuel cell.
Reference PLUG POWER "[***] Test Study. Version 1.0 Dated February 18,
1998," The following is an estimate of time and material costs required by BENET
Laboratories to perform the work.
<TABLE>
<CAPTION>
Task ID Task Name Materials Labor Estimate
- --------- ---------------------------------- --------- --------------
<S> <C> <C> <C>
1 Support and witnessing disassembly [***] [***]
2 Analysis of Water Samples [***] [***]
3 Analysis of Hardware Components [***] [***]
Total Labor [***]
Labor Rate [***]
Total Labor [***]
Total Material [***]
Grand Total [***]
</TABLE>
Expenditures in excess of [***] by BENET Laboratories shall not be
reimbursable unless authorized in advance by written amendment to this
Modification No. 3 executed by a representative of PLUG POWER.
Approval to Commence Work:
For PLUG POWER: For BENET Laboratories
- --------------------------- --------------------------
Date: Date:
- --------------------------- --------------------------
PLUG POWER Proprietary Information
<PAGE>
Exhibit 10.25
PLUG POWER, L.L.C.
SECOND
AMENDMENT AND RESTATEMENT
OF THE
MEMBERSHIP OPTION PLAN
February 15, 1999
WHEREAS, Plug Power, L.L.C., a limited liability company organized under
the laws of the State of Delaware ("Company") entered into a Membership Option
Plan and Agreement, effective as of the 1st day of July, 1997 (the "Plan"); and
WHEREAS, the Company desires to amend the Plan to provide consultants the
opportunity to acquire Class B membership interests in the Company and to share
in its success, with the added incentive to work effectively for and in the
Company's interest; and
WHEREAS, at a special meeting of the Members of Company held on January 26,
1999, at which all of the Members were present, either by person or by
telephone, and acting with full authority, the Members unanimously agreed to
amend the limited liability company agreement to permit the company to provide
consultants the opportunity to acquire Class B membership interests in the
Company, subject to the specific prior approval by the board of managers for
each consulting contract that provides stock options as part of the contract;
and
WHEREAS, the Company desires to also amend the Plan to include in the
definition of "Employees" eligible to participate in the Plan those employees of
the Company who become directly employed by GE Fuel Cell Systems, L.L.C.
("GEFCS"); and
WHEREAS, such former employees shall be subject to the same terms and
conditions of the Plan; and
NOW, THEREFORE, the text of the original Plan as amended is hereby amended
and restated in its entirety to read as follows:
Agreement, made and effective as of the 15th day of February, by Plug
Power, L.L.C., a limited liability company organized under the laws of the State
of Delaware ("Company").
WHEREAS, Company is a limited liability corporation with Class A membership
interests and Class B membership interests, and
WHEREAS, Company has determined that its interests will be advanced and
best served by providing an incentive to its current employees, certain former
employees and certain consultants, to acquire Class B membership interests in
Company and to share in its success, with the added incentive to work
effectively for and in Company's interest,
<PAGE>
NOW THEREFORE, Company hereby establishes the Plan as follows:
ESTABLISHMENT OF PLAN
The Plan shall be known as the Plug Power Membership Option Plan ("Plan"),
and shall be effective on the date first above written.
ELIGIBILITY
Employees. All employees of Company shall participate in the Plan on its
---------
effective date. An Employee who is eligible to participate in the Plan, as set
forth on Exhibit "A" is hereinafter referred to as "Employee", or in the plural,
as "Employees." Members of the Board of Managers ("Managers") of the Company
and/or Corporations named in lieu of a Manager, as set forth on Exhibit "B",
shall also participate in the Plan on its effective date. In addition,
employees of the Company who become directly employed GE Fuel Cell Systems,
L.L.C. ("GEFCS Employees") shall also be eligible to participate in the Plan.
Hereafter, in this Plan, Managers and/or Corporations and/or GEFCS Employees
shall be referred to as "Employees", and shall be subject to the remaining
provisions of this Plan as though they were Employees, unless specifically
provided otherwise.
Consultants. The board of managers of the Company shall determine those
-----------
consultants of Company, as set forth on Exhibit "C", eligible to participate in
the Plan on its effective date. A Consultant who is eligible to participate in
the Plan and who is shown on the attached Exhibit "C" is hereinafter referred to
as "Consultants", or in the plural, as "Consultants."
GRANT OF OPTIONS
Employees. Company hereby grants to the Employees, as shown on Exhibit "A"
---------
(Employees) and Exhibit "B" (Managers), as a matter of separate agreement and
not in lieu of any other compensation to which such Employees may be otherwise
entitled, the right and option, hereinafter called "Option", or "Options", to
purchase the number shares of Class B membership interests of the Company, at
such times, and in such amounts, as the Company shall determine, on the terms
and conditions hereinafter set forth.
Company may, from time to time, grant additional Options to Employees.
Consultants. Company hereby grants to the Consultants, as shown on Exhibit
-----------
"C", as a matter of separate agreement, the right and option, hereinafter called
"Option" or "Options", to purchase the number shares of class B membership
interests of the Company, at such times, and in such amounts, on the terms and
conditions hereinafter set forth.
Company may, from time to time, amend Exhibit "C", as may be required to
add new Consultants who become eligible for the Plan, or to grant additional
Options to Consultants, but not without the prior authorization of the board of
managers.
2
<PAGE>
OPTION PRICE
The option exercise price for shares of Class B membership interests shall
be set forth on Exhibit "A" for Employees, Exhibit "B" for Managers, and Exhibit
"C" for Consultants, and shall be determined by the Company's board of managers
and which price shall represent the fair value of Company stock on the grant
date.
WHEN OPTIONS ARE EXERCISABLE
Employees. Options shall be exercisable by Employees only after such
---------
Options have vested. Furthermore, no options may be exercised, even if vested,
prior to July 1, 2000, except as provided in sub-paragraphs (f) and (a) below.
Vesting under this Plan is determined by an Employee's length of service
with the Employer, measured from an Employee's date of hire by the Employer,
provided however, that if an Employee's direct prior employer was either
Mechanical Technology, Inc. or Detroit Edison, such Employees prior service
(measured from his date of hire) with either Mechanical Technology, Inc. or
Detroit Edison shall be counted as service for purposes of this Plan.
Options shall vest as follows.
(a) If an Employee has completed 12 months of continuous service as of the
date of the option grant, such Employee shall immediately be 20%
vested in the Options granted. If an Employee has not completed 12
months of continuous service as of the date of Option grant, he shall
become 20% vested in his Options once he has completed twelve months
of continuous service.
(b) An additional 20% of Options shall vest on the first 12 month
anniversary from the date of original Option grant.
(c) An additional 20% of Options shall vest on the second 12 month
anniversary from the date of original Option grant.
(d) An additional 20% of Options shall vest on the third 12 month
anniversary from the date of original Option grant.
(e) An additional 20% of Options shall vest on the fourth 12 month
anniversary from the date of original Option grant.
(f) All Options originally granted shall become immediately vested and
exercisable in the event of the sale of all or substantially all of
the Company's assets, or in the event of the sale of all or
substantially all of the Company's Class A membership interests.
3
<PAGE>
(g) All vested options shall become immediately exercisable in the event
the Company's Class A membership interests become publicly traded.
(h) Notwithstanding sub-paragraphs (a) through (e) above, Options granted
to Managers, shall vest as follows:
(1) 50% of Options granted to Managers shall vest immediately upon
grant.
(2) An additional 25% of Options granted to Managers shall vest 12
months following grant.
(3) An additional 25% of Options granted to Managers shall vest 24
months following date of grant.
Options granted under this Agreement shall automatically expire, and be
null and void, ten (10) years after the date of grant, except in the death of an
Employee.
In the event that an Employee's employment shall be terminated for any
reason except death, any Options held by the affected Employee, and exercisable,
must be exercised, if at all, within a period of one (1) month following any
such termination. Any Options outstanding and not exercised within such one (1)
month period shall become void. In no event shall this one (1) month period be
in addition to the ten (10) year option periods described in the paragraph
immediately preceding,
In the event of the death of an Employee while holding Options which were
exercisable on the date of death, the estate or beneficiary of such Employee
shall have the right to exercise any such outstanding Options for a period of
one (1) year following death, even if such extended exercise period extends
beyond the ten (10) year option period. The Options granted by this agreement
shall not be transferable by the Employee other than by will or the laws of
descent and distribution.
Consultants. Options shall be exercisable by Consultants only after such
-----------
Options have vested. Furthermore, no options may be exercised, even if vested,
prior to July 1, 2000, except as provided in sub-paragraphs (d) and (e) below.
Options shall vest as follows:
(a) One-third (1/3) of the Options shall vest upon the expiration of
Consultant's initial contract term.
(b) An additional one-third (1/3) of the Options shall vest on the first
12 month anniversary of the expiration of the initial contract term.
(c) The remaining one-third (1/3) of Options shall vest on the second 12
month anniversary of the expiration of the initial contract term.
4
<PAGE>
Options shall vest in accordance with the foregoing schedule regardless of
whether Consultant's initial contract terminates prior to the expiration of the
contract term or whether Consultant's contract is renewed. Vesting, however, is
subject to and contingent upon Consultant complying with the non-compete
obligations set forth in his/her consulting contract. Additionally, should
Consultant, at any time, provide services for, or work for a competing company,
then all outstanding options, whether vested or not, become immediately null and
void. If for any reason Consultant does not complete the contracted work as is
evident by Consultant receiving less than the original contracted revenue, then
the awarded options will be proportionately reduced to reflect the same
percentage as cash paid versus original contract revenue.
(d) Options originally granted shall become immediately vested and
exercisable in the event of the sale of all or substantially all of
the Company's assets, or in the event of the sale of all or
substantially all of the Company's Class A membership interests.
(e) All vested options shall become immediately exercisable in the event
the Company's Class A membership interests become publicly traded.
Options granted under this Agreement shall automatically expire, and be
null and void, five (5) years after the date of grant, except in the death of a
Consultant.
In the event of the death of a Consultant while holding Options which were
exercisable on the date of death, the estate or beneficiary of such Consultant
shall have the right to exercise any such outstanding Options for a period of
one (1) year following death, even if such extended exercise period extends
beyond the five (5) year option period. The Options granted by this agreement
shall not be transferable by the Consultant other than by will or the laws of
descent and distribution.
HOW OPTIONS ARE EXERCISABLE
An Employee, Consultant or his/her estate or beneficiary shall exercise the
Options granted by this agreement by written notice to the Company, which notice
shall specify the number of Class B membership interests to be purchased, and
which shall be accompanied by a check in full payment of the option price for
such Class B membership interests. Until such payment, an Employee, Consultant
or his/her estate or beneficiary shall have no rights in the optioned Class B
membership interests.
Until such time as the Company's membership interests or stock is publicly
traded or until such time that the board of managers amend this agreement, the
Employee and Consultant agrees that all interests purchased by him/her, his/her
estate or beneficiary under the Plan are
5
<PAGE>
acquired for investment and not for distribution. The Employee and Consultant
also agrees that any notice of exercise of the Option shall become accompanied
by a written representation, signed by the Employee and/or Consultant, to that
effect.
If the Company ever commences a public offering of its securities, it is
likely the Company's membership interests will be reclassified into shares of
common stock. Such reclassification will be structured so that Employee's
and/or Consultant's percentage of ownership or interest in the Company is not
diluted. Employees and Consultants also understand that should the Company's
membership interests or stock become publicly traded, there may be certain
restrictions placed on the sale of interests held by Employees and/or
Consultants, and other insiders, for a period of up to one year or longer, as
determined by the underwriter of any such transaction.
Employees and Consultants further understand that neither the Company, its
officers, nor its board of managers can guarantee or promise that the Company's
membership interests or stock will ever be registered or publicly traded.
Additionally, there may never be a market for any such Company membership
interests or stock, and that such Company membership interests or stock may be
unmarketable.
The Company shall have no duty or obligation to repurchase any or all of
its outstanding Class B membership interests.
CONTINUED SERVICE
Employees. Employee, in consideration of the granting of Options to
---------
him/her, agrees that he/she will continue to render services to the Company
except as he/she may be prevented from doing so by death, disability,
retirement, or termination.
Nothing in the Plan shall be deemed to confer to an Employee any guaranteed
right to continue to be employed by the Company, or interfere in any way with
the right of the Company to terminate his/her employment, as provided by the by-
laws of the Company or as provided by law.
Consultants. Nothing in the Plan shall be deemed to confer to a Consultant
-----------
any guaranteed right to continue to be under contract by the Company, or
interfere in any way with the right of the Company to terminate his/her
contract, as provided by the by-laws of the Company or as provided by law.
TAX EFFECTS
Employees and Consultants understand that there may be both federal and
state income tax consequences associated with the exercise of the Options
granted by the Plan, including withholding requirements. Employees acknowledge
that they have conferred with their
6
<PAGE>
respective counsel regarding any and all such tax consequences, and that in no
event shall Company be liable or responsible for any such tax liability.
GOVERNING LAW
The Plan shall be governed by the law of the State of New York.
IN WITNESS WHEREOF, Corporation has caused this agreement to be executed on
the date of first above written.
Plug Power, L.L.C.
By: /s/ Gary Mittleman
-----------------------------------
Gary Mittleman
President Chief Executive Officer
7
<PAGE>
FIRST AMENDMENT TO
SECOND AMENDMENT AND RESTATEMENT
OF THE
MEMBERSHIP OPTION PLAN
PLUG POWER, L.L.C.
This First Amendment to Second Amendment and Restatement of the Membership
Option Plan (the "Option Plan") is effective as of first day of October, 1999,
and amends the Option Plan, dated as of February 15, 1999;
WHEREAS, Plug Power, L.L.C. (the "Company") desires to amend the Option
Plan to provide for the ability of the Company to vary the terms of vesting and
exercisability of options granted under the Option Plan;
WHEREAS, at a meeting of the Members of the Company held on October 1,
1999, at which all Members were present, either by person or by telephone, and
acting with full authority, the Members agreed to amend the Option Plan, as set
forth below;
NOW, THEREFORE, the Option Plan is hereby amended as follows:
1. On page 5 of the Option Plan, before the title "How Options Are
Exercisable", insert the following sentence in a new paragraph:
"Notwithstanding anything to the contrary provided herein, the Company may, at
its option, provide for different time limitations for vesting and
exercisability of Options by written agreement with the grantee of such
options."
2. The remainder of the Option Plan shall continue in full force and effect.
8
<PAGE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
EXHIBIT 10.27
DISTRIBUTION AGREEMENT
----------------------
This DISTRIBUTION AGREEMENT ("Agreement") is dated as of the 27th day of June,
1997, and entered into by and between Plug Power, L.L.C., a limited liability
company organized and existing under the laws of the State of Delaware
("Company"), with its principal place of business at 968 Albany-Shaker Road,
Latham, New York 12110, and Edison Development Corporation, a company organized
and existing under the laws of the State of Michigan ("Distributor"), with its
principal place of business at 2000 Second Avenue, Detroit, Michigan 48226.
BACKGROUND STATEMENTS
WHEREAS, the Company owns all right, title and interest in certain fuel
cells with capacities of 2 kilowatts and higher, as is set out more fully in
Exhibit 1 ("Products");
WHEREAS, the Distributor in consideration for and in reliance of the grant
of the exclusive distributorship hereunder has or will expend considerable time
and funds to establish a distribution network, plant and facilities and training
its support and sales staff.
WHEREAS, the parties desire Distributor to act in certain circumstances as
Company's exclusive distributor for the Products to certain entities within the
United States as hereinunder specified.
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinunder set forth, and other good and valuable consideration the receipt and
sufficiency of which is acknowledged, the parties agree as follows:
1 . APPOINTMENT.
-----------
a. Upon execution of this Agreement, Company hereby appoints Distributor
as Company's exclusive independent distributor during the term of this Agreement
to promote and assist Company in the sale of Products which are developed by
Plug Power, to end-users for stationary applications in the Territory, as that
term is defined below, and subject to the terms and conditions provided herein.
b. Upon execution of this Agreement, Distributor hereby accepts the
appointment, subject to the terms and conditions as provided herein.
2. TERRITORY.
---------
a. Distributor's territory for this Agreement shall mean the states of
Michigan, Ohio, Indiana and Illinois ("Territory").
<PAGE>
b. Without the prior written consent of the Company, Distributor shall
not solicit nor seek customers for the Products, or establish or maintain a
branch facility or distribution facility for the sale, servicing, warehousing,
or storage of the Products or spare parts thereof outside the Territory.
c. Distributor may only sell the Products directly and not for resale.
d. DISTRIBUTOR MAY NOT SELL OR DISTRIBUTE THE PRODUCTS TO ANY ENTITY FOR
TRANSPORTATION APPLICATIONS.
e. Distributor will be the sole person or entity acting in such capacity
in the Territory; and Company shall not appoint any subdistributor, other agent
or person to distribute or promote the Products, or otherwise undertake
Distributor's obligations in the Territory.
3. EXCLUSIVITY.
-----------
a. The term "Exclusive" means that under this Agreement as long as
Distributor is in full compliance with its obligations, including the percentage
sales requirements set forth in Section 5 herein, Company shall not appoint any
other distributor, agent, representative, or dealer for promotion or sale of ~he
Products to end users for stationary applications in the Territory and shall
further refrain from selling Products to end users for stationary applications
in the Territory directly, other than through Distributor.
b. Company shall not be responsible for transgression of Distributor's
exclusive rights hereunder by third parties not controlled by Company, but shall
not sell or deliver Products to any other party outside of the Territory if
Company has knowledge that the Products are to be sold or distributed by or
through another party in the Territory.
c. In the event that Distributor is in default of its obligations under
this Agreement, or after January 1, 2010, then Company retains the right, in
addition to any other rights and remedies, to engage another distributor,
dealer, agent, or other such representative on a nonexclusive basis for all or
part of the Territory.
d. In the event that Distributor engages in the distribution of any fuel
cell product to end users for stationary applications within the Territory that
is competitive with the Products, then the Company retains the right, in
addition to any other rights and remedies, to engage another distributor,
dealer, agent, or other such representative on a nonexclusive basis for all or
part of the Territory.
4. PRICE OF PRODUCT.
----------------
a. The purchase price for the Products purchased by Distributor shall be
[***], but nothing shall preclude the parties from mutually agreeing on a
different price. [***] available to Distributor hereunder shall be expressly
limited to cash sales payable in full at delivery and shall not include price
arrangements offered by Company to others involving the leasing or financing of
the Products, revenue sharing, or other hybrid arrangements with Company's
customers.
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
b. Any and all orders from time to time submitted by Distributor shall be
subject to Company's then-prevailing terms and conditions of sale, which may be
changed or established from time to time by Company at its discretion on notice
to Distributor, including late fees, and interest on any unpaid amounts.
5. MINIMUM SALES OBLIGATION.
------------------------
Beginning on the third full calendar year after the Products are ready for
market, and for each successive year during the term hereof, Distributor's
sales of the Products shall meet or exceed the lower of either (i) on an annual
basis [***], or (ii) [***] ("Sales Obligations"). Should Distributor fail to
meet its Sales Obligations, this Agreement shall automatically and without
notice become nonexclusive, provided however, that such failure to meet the
Sales Obligations shall not be the basis for a default under or the termination
of this Agreement. [***]
6. DISTRIBUTOR COVENANTS AND REPRESENTATIONS.
-----------------------------------------
Distributor represents, warrants, to Company (its members, agents,
officers, directors) and agrees:
a. To provide Company with monthly nonbinding good-faith forecasts of its
anticipated requirements and shipping dates for the three month period following
each forecast (or, if shorter, the remaining term of this Agreement).
b. Distributor shall not sell the Product outside the Territory. To
ensure compliance with this requirement, each Product shall be identified by a
unique serial number. This serial number will be used to identify Products sold
outside the Territory. Should Company's review of a Product's serial number lead
to the conclusion that a Product has been sold outside the Territory, such sale
will be considered a breach of this Agreement.
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
<PAGE>
c. Not to (i) disassemble, decompile or otherwise reverse engineer the
Product or otherwise attempt to learn the ideas underlying the Product; (ii)
take any action contrary to Company's license granted to Distributor, except as
expressly and unambiguously allowed under this Agreement; (iii) copy, modify or
enhance the Product; or (iv) allow others to do any of the foregoing.
d. Distributor shall advertise, promote and label the products with
Company's name and trademarks ("Branding Materials"). Distributor shall provide
Company with all such Branding Materials for Company's approval prior to their
use. Company shall not unreasonably withhold its approval of the Branding
Materials. Distributor shall not design the Branding Materials in such a way as
to either imply or state that Distributor's relationship with Company is greater
than that of an independent distributor.
e. TO KEEP COMPANY INFORMED AS TO ANY PROBLEMS ENCOUNTERED WITH THE
PRODUCTS AND ANY RESOLUTIONS ARRIVED AT FOR THOSE PROBLEMS, AND TO COMMUNICATE
PROMPTLY TO COMPANY ANY AND ALL MODIFICATIONS, DESIGN CHANGES OR IMPROVEMENTS OF
THE PRODUCT SUGGESTED BY ANY CUSTOMER, EMPLOYEE OR AGENT. DISTRIBUTOR FURTHER
AGREES THAT COMPANY SHALL HAVE AND IS HEREBY ASSIGNED ANY AND ALL RIGHT, TITLE
AND INTEREST IN AND TO ANY SUCH SUGGESTED MODIFICATIONS, DESIGN CHANGES, OR
IMPROVEMENTS OF THE PRODUCT, WITHOUT THE PAYMENT OF ANY ADDITIONAL CONSIDERATION
THEREFOR EITHER TO DISTRIBUTOR, OR ITS EMPLOYEES, AGENTS OR CUSTOMERS.
DISTRIBUTOR WILL ALSO PROMPTLY NOTIFY COMPANY OF ANY INFRINGEMENT OF ANY
TRADEMARKS OR OTHER PROPRIETARY RIGHTS RELATING TO THE PRODUCT.
f. To accept returns in accordance with procedures specified from time to
time by Company.
g. Distributor shall carry out all sales promotion work and solicitation
of sales for the Products diligently, using its reasonable efforts for the
account of Company. These efforts shall include, but shall not in any way be
limited to: (i) advertising and promoting the Products effectively; (ii)
ordering and keeping a representative selection of Company's up-to-date
promotional sales literature, technical bulletins, price lists, manuals,
catalogues and other promotion materials in good condition; (iii) maintaining
the equipment and facilities to enable Distributor to demonstrate the Products
to potential new customers; and (iv) assisting Company in securing and
protecting any property rights in connection with the Products in the Territory.
h. Distributor shall not make any representations as to the Products
other than those, if any, contained in written information and data provided by
Company. Distributor shall be totally responsible for any of its representations
and shall hold Company harmless from any claims and expenses, including, but not
limited to, reasonable attorneys' fees,
<PAGE>
resulting from such unauthorized representations.
i. Distributor shall not manufacture the Products, nor engage any entity
other than Company to do so.
7. COMPANY'S OBLIGATIONS.
---------------------
a. Company shall supply Distributor with copies of brochures, catalogues,
technical specification sheets, and promotional sales literature and such other
information or materials as Company, in its sole judgment, believes will assist
Distributor in promoting and assisting in the sale and acceptance of the
Products in the Territory. These items shall be conveyed in English, unless the
parties otherwise agree from time to time.
b. In the event that Company receives an inquiry for the Products from
the end users in the Territory, Company will refer the prospect to Distributor.
c. Company shall, at all times maintain an adequate level of inventory to
timely meet all current and anticipated orders for the Products.
8. OPERATIONS AND EXPENSES.
-----------------------
The detailed operations of the Distributor under this Agreement are subject
to its sole control and management, subject to compliance with the terms hereof.
Distributor shall be responsible for all of its own expenses and employees.
Distributor agrees that it shall incur no expense chargeable to Company except
as may be specifically authorized, in advance, in writing, in each case by
Company nor shall any such expenses, including taxes, fees, or similar charges,
be deducted from any amounts due hereunder.
9. TRADEMARK LICENSE AND USE.
-------------------------
a. Company grants to Distributor a non-exclusive, non-transferable
license to use trademark(s) described in Exhibit 2 to this Agreement
("Authorized Trademarks") only in connection with the sale and promotion of the
Products in the Territory and during the term of and pursuant to the terms and
conditions of the Agreement. No trademark, trade name or other designations may
be used without the written consent of Company except as expressly provided in
this section. Company expressly allows Distributor to represent that it is a
distributor of the Products, including on the Products themselves, advertising
materials, stationary and letterhead.
b. Distributor shall not assign or sub-license its rights to the
Authorized Trademarks to any other person or entity.
c. Distributor shall not remove, change, obscure, or add to the labels,
markings,
<PAGE>
names or trademarks that Company has affixed to any of the Products.
d. Distributor shall not attempt to, or register any of the Authorized
Trademarks in any jurisdiction without the express consent of Company.
e. Distributor acknowledges and agrees that Company's remedy at law for
any breach of Company's obligations under this paragraph would be inadequate,
and agrees and consents that temporary and permanent injunctive relief may be
granted in any action or proceeding which may be brought to enforce any
provision hereof without the necessity of proof of actual damages.
10. CONFIDENTIALITY.
---------------
a. Without the prior written consent of Company, Distributor shall not
disclose to any third party any confidential business information or trade
secrets of Company, including but not limited to: the content of this Agreement;
customer lists; product specifications; product technical manuals; service
records; financial or sales reports; price lists; and any materials related to
Company's customers, financial performance, or design of the Products, except
for or in connection with any assignment permitted under Section 16 hereof.
b . Distributor hereby acknowledges and agrees that the Products are
proprietary to Company. Distributor agrees to use utmost diligence to protect
the trade secrets and other proprietary rights of Company in the Products from
disclosure to third parties. Distributor shall also promote compliance with the
terms and conditions of this Agreement by employees and others with access to
the Products.
c. Distributor acknowledges and agrees that Company's remedy at law for
any breach of Company's obligations under this paragraph would be inadequate,
and agrees and consents that temporary and permanent injunctive relief may be
granted in any action or proceeding which may be brought to enforce any
provision hereof without the necessity of proof of actual damages.
d. Distributor's obligations under this confidentiality provision shall
survive termination or expiration of this Agreement.
11. THIS SECTION INTENTIONALLY DELETED.
----------------------------------
12. ETHICAL CONDUCT.
---------------
Distributor expressly agrees that it shall not be entitled to any
commissions, fees, discounts or other compensation if facts are known to Company
that reasonably support a belief that Distributor is in violation of any of the
terms and conditions of paragraph 18 of this Agreement.
<PAGE>
13. LIMITED WARRANTY; DISCLAIMER: INDEMNITY.
---------------------------------------
a. Company provides only the warranty set forth in its warranty policy,
as modified by this Section 13(a). Distributor will handle and be responsible
for all warranty returns from its direct customers. Products obtained from
Company that do not comply with the warranty and are returned (by Distributor
only) to Company during the warranty period (as shown by appropriate
documentation) will be repaired or replaced at Company's option, provided
Distributor bears the cost of freight and insurance to the point of repair.
Company will bear the cost of freight and insurance for return of goods to
Distributor. If Company cannot, or determines that it is not practical to,
repair or replace the returned Product, the price therefor paid by Distributor
will be refunded or, at the Company's discretion, credited against other
Distributor obligations or toward future purchases. COMPANY MAKES NO OTHER
WARRANTIES WITH RESPECT TO THE PRODUCTS OR ANY SERVICES AND DISCLAIMS ALL OTHER
WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE. ANY ACTION AGAINST COMPANY BASED ON THIS AGREEMENT MUST BE BROUGHT
WITHIN ONE YEAR FOLLOWING INJURY.
b. The above warranty does not extend to any Product that is modified or
altered, is not maintained to Company's maintenance recommendations, is operated
in a manner other than that specified by Company, has its serial number removed
or altered or is treated with abuse, negligence or other improper treatment
(including, without limitation, use outside the recommended environment).
Distributor's sole remedy with respect to any warranty or defect is as stated
above.
c. Distributor may extend its own product warranty to its customers
provided Distributor alone shall be responsible to such customer thereof and
neither Distributor nor such customer shall have recourse against Company with
respect thereto. Distributor hereby agrees to indemnify and hold Company
harmless from any and against all claims, actions, losses, damages, costs,
liabilities and expenses (including reasonable attorneys' fees) based upon any
express or implied warranty made by Distributor to any customer.
14. LIMITED LIABILITY.
-----------------
EXCEPT AS SET FORTH IN SECTION 13, COMPANY WILL NOT BE LIABLE TO
DISTRIBUTOR OR THIRD PARTY WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT
UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY, OR OTHER LEGAL OR EQUITABLE
THEORY FOR (I) ANY AMOUNTS IN EXCESS IN THE AGGREGATE, OF THE AMOUNTS PAID TO
COMPANY HEREUNDER DURING THE TWELVE-MONTH PERIOD PRIOR TO DATE THE CAUSE OF
ACTION AROSE OR (11) ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS OR BUSINESS OPPORTUNITIES) OR (III) COST OF PROCUREMENT OF SUBSTITUTE
GOODS, TECHNOLOGY, OR SERVICES.
<PAGE>
COMPANY SHALL HAVE NO LIABILITY FOR ANY FAILURE OR DELAY DUE TO MATTERS BEYOND
ITS REASONABLE CONTROL.
15. RELATIONSHIP OF PARTIES.
-----------------------
The parties hereto expressly understand and agree that Distributor is an
independent contractor in the performance of each and every part of this
Agreement, is solely responsible for all of its employees and agents and its
labor costs and expenses arising in connection therewith and is responsible for
and will indemnify, defend and hold Company harmless from any and all claims,
liabilities, damages, debts, settlements, costs, attorneys' fees, expenses, and
liabilities of any type whatsoever that may arise on account of Distributor's
activities, or those of its employees or agents, including, without limitation,
providing unauthorized representations or warranties (or failing to disclose all
limitations on warranties and liabilities set forth herein on behalf of Company)
to its customers or breaching any term, representation or warranty of this
Agreement. Company is in no manner associated with or otherwise connected with
the actual performance of this Agreement on the part of Distributor, nor with
Distributor's employment of other persons or incurring of other expenses. Except
as expressly provided herein, Company shall have no right to exercise any
control whatsoever over the activities or operations of Distributor.
16. ASSIGNMENT.
----------
Distributor shall not assign this Agreement or its rights under this
Agreement to any other third party nor may Distributor sublicense the
distribution of the Product to any subdistributor for further distribution,
except that Distributor may assign its rights to and obligations under this
Agreement to any entity that is 80% or more owned or controlled by DTE Energy
Company or by any other entity that in turn is 80% or more owned or controlled
by DTE Energy Company, provided that any such entity shall be bound, in writing,
to all restrictions on Distributor contained in this Agreement.
17. TERM AND TERMINATION.
--------------------
This Agreement may be terminated by a party for cause immediately by
written notice upon the occurrence of any of the following events:
i. If the other ceases to do business, or otherwise terminates it
business operations or if there is a material change in control of the other; or
ii. If the other shall fail to promptly secure or renew any license,
registration, permit, authorization or approval for the conduct of its business
in the manner contemplated by this Agreement or if any such license,
registration, permit, authorization or approval is revoked or suspended and not
reinstated within sixty days; or
<PAGE>
iii. If the other materially breaches any material provision of this
Agreement and fails to substantially cure such breach within thirty days (ten
days in the case of a failure to pay) of written notice describing the breach;
or
iv. If the other becomes insolvent or seeks protection under any
bankruptcy, receivership, trust deed, creditors arrangement, composition or
comparable proceeding, or if any such proceeding is instituted against the other
(and not dismissed within 90 days); or
v. If Distributor breaches any other agreement or contract with
Company.
b. On termination or expiration of this Agreement for any reason
whatsoever including, but not limited to, termination or expiration by passage
of time or nonrenewal, the parties expressly agree that the following shall take
effect: (i) all rights granted to Distributor under or pursuant to this
Agreement shall immediately cease; (ii) all contracts and orders placed by
Distributor for the Products and accepted, but not filled or delivered by
Company as of the date of termination, shall be filled or delivered by Company
subject to the terms and conditions of this Agreement; (iii) all contracts or
orders for the Products not accepted by Company on or before the date of
termination shall, at Company's sole option, be canceled; (iv) Distributor shall
forthwith return to Company all promotional Sales information materials or
demonstration products that have been furnished by Company to Distributor during
the term of this Agreement, it being understood that no copies of these
foregoing materials may be retained by Distributor subsequent to the date of
termination or expiration of this Agreement; and (v) Company shall repurchase
from Distributor, at the then fair market value in the Territory, any Products
purchased from Company by Distributor for inventory or other purpose directly
related to furthering the purposes of this Agreement.
c. Distributor acknowledges and expressly agrees that Company shall not
be liable to Distributor, and Distributor hereby waives any claims for
compensation or damages of any kind or character whatsoever, whether on account
of the loss by Distributor of present or prospective compensation or anticipated
compensation, or of expenditures, investments or commitments made either in
connection therewith or in connection with the establishment, development or
maintenance of establishment, development or maintenance of Distributor's
business, or on account of any other cause or thing whatsoever.
d. Termination is not the sole remedy under this Agreement and, whether
or not termination is affected, all other remedies will remain available.
18. NO EXPORT.
---------
The Products shall not be distributed for export nor sold to the end users for
use outside the Territory. The parties further acknowledge and agree that all
actions taken by the parties in furtherance of fulfillment of this Agreement
shall be in full compliance with all applicable U.S. export control laws and
regulations, as they are amended from time to time. The parties
<PAGE>
recognize that such laws may require, among other things, applying for export
licenses for the export of information ("Technical Data"). Failure to obtain
such licenses or otherwise comply with such laws could subject the parties to
criminal sanctions including imprisonment. It is further acknowledged that the
export of Technical Data, including the Products, software, know-how and other
proprietary information, is "deemed" by the U.S. government to be exported: (i)
upon transmission from the United States; (ii) upon oral release by a U.S.
citizen in a foreign country; or (iii) by release in the United States to non-
U.S. nationals.
19. AMENDMENT AND WAIVER.
--------------------
Except as otherwise expressly provided herein, any provision of this
Agreement may be amended and the observance of any provision of this Agreement
may be waived (either generally or any particular instance and either
retroactively or prospectively) only with the written consent of the parties.
20. GOVERNING LAW AND LEGAL ACTIONS.
-------------------------------
This Agreement shall be governed by and construed under the laws of the
State of Michigan and the United States without regard to conflicts of law
provisions. Unless waived by Company in writing for the particular instance
(which Company may do at its option), the sole jurisdiction and venue for
actions related to the subject matter hereof shall be the State of Michigan and
U.S. federal court for the Eastern District of Michigan. Both parties consent to
the exhibit jurisdiction and venue of such courts and agree that process may be
served in the manner provided herein for giving of notices or otherwise as
allowed by Michigan or federal law. In any action or proceeding to enforce
rights under this Agreement, the prevailing party shall be entitled to recover
costs and reasonable attorneys' fees.
21. FORCE MAJEURE.
-------------
Neither party shall be liable under this Agreement for any loss or damage
of any nature incurred as a result of any failures of delays in performance
because of any cause or circumstances beyond its control. This includes, but is
not limited to, any failure or delays in performance caused by any strikes,
lockouts, labor disputes, fires, acts of God or the public enemy, riots,
incendiaries, interference by civil or military authorities, compliance with the
laws, orders or policies of any government authority, delays in transit or
delivery on the part of transportation companies or failures of communication
facilities or sources of raw materials. However, the party claiming a Force
Majeure Event must notify the other in writing within ten days of the beginning
of such an event, and no Force Majeure Event shall extend for a period of
greater than 45 days.
22. HEADINGS.
--------
Headings and captions are for convenience only and are not to be used in
the
<PAGE>
interpretation of this Agreement.
23. NOTICES.
-------
Any notices or other communications required or permitted hereunder shall
be in writing and shall be deemed sufficiently given if (i) delivered in person,
(ii) sent by recognized overnight courier, or (iii) by registered or certified
mail, postage prepaid, to the respective party at the address set out above or
to such other address any party shall have given notice in accordance with this
Section 23. Notices hand-delivered shall be deemed given the same day as
delivery-notices sent by overnight mail shall be deemed given the day following
delivery, and notices sent by mail shall be deemed given three business days
after the date posted, provided however, that any change of address shall be
effective only upon receipt.
24. ENTIRE AGREEMENT.
----------------
This Agreement supersedes all proposals and agreements whether oral or
written, all negotiations, conversations, or discussions between or among
parties relating to the subject matter of this Agreement and all past dealing or
industry custom.
25. SEVERABILITY.
------------
If any provision of this Agreement is held by a court of competent
jurisdiction to be illegal, invalid or unenforceable, that provision shall be
limited or eliminated to the minimum extent necessary so that this Agreement
shall otherwise remain in full force and effect and enforceable.
26. CORPORATE AUTHORITY.
-------------------
The individuals executing this Agreement on behalf of Company and
Distributor do each hereby warrant and represent that they respectively have
been and are on the date of this Agreement duly authorized by all necessary or
appropriate corporate action to execute this Agreement.
27. COUNTERPARTS.
------------
To facilitate execution, this Agreement may be executed in more than one
counterpart, each of which shall constitute an original and all of which shall
constitute one and the same Agreement.
28. FACSIMILE.
---------
Facsimile signatures to this Agreement shall be considered original signatures.
<PAGE>
29. BASIS OF BARGAIN.
----------------
EACH PARTY RECOGNIZES AND AGREES THAT THE WARRANTY DISCLAIMERS AND
LIABILITY AND REMEDY LIMITATIONS IN THIS AGREEMENT ARE MATERIAL, BARGAINED-FOR
BASES OF THIS AGREEMENT, AND THAT THEY HAVE BEEN TAKEN INTO ACCOUNT AND
REFLECTED IN DETERMINING THE CONSIDERATION TO BE GIVEN BY EACH PARTY UNDER THIS
AGREEMENT AND IN THE DECISION BY EACH PARTY TO ENTER INTO THIS AGREEMENT.
SIGNATURE PAGE FOLLOWS.
<PAGE>
EDISON DEVELOPMENT CORPORATION
(a Michigan corporation)
By: ____________________________________
Its: ____________________________________
"Distributor"
PLUG POWER, L.L.C.
(a Delaware limited liability company)
By its Managing Member:
________________________________________
By: ____________________________________
Its: ____________________________________
"Company"
<PAGE>
Exhibit 1
"Products"
The Products made by the Company are a range of fuel cell systems that are
capable of generating electricity through electrochemical reactions. The
components comprising the fuel cell systems include, but are not limited to, one
or more of the following whether used alone or in combination:
. A fuel processor that generates hydrogen gas and/or other gas(es).
. A fuel cell stack(s) that generates electricity through electrochemical
reactions.
. An inverter system to convert direct current electricity to alternating
current electricity.
. A system controller for operation of the fuel cell system or any
component thereof.
. An energy storage system.
. A heat exchanger.
<PAGE>
EXHIBIT 2 TO
DISTRIBUTION AGREEMENT
Authorized Trademarks
Pursuant to the Plug Power, L.L.C. Distribution Agreement ("Agreement")
dated ________________, _____, between Plug Power, L.L.C. ("Company") and
Mechanical Technology, Inc., ("Distributor"), it is further agreed,
effective________________, 1997 (the "Exhibit 2 Effective Date"), that the
Authorized Trademarks of Plug Power which the Agreement grants Distributor a
non-exclusive nontransferable license to use consists of the following names and
graphic representations thereof:
1 . "Plug Power, L.L.C."
2. Stylized Plug Power Logo
<PAGE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 406 UNDER THE
SECURITIES ACT AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE LOCATIONS OF THE OMITTED INFORMATION HAVE BEEN INDICATED WITH
ASTERISKS.
AMENDED DISTRIBUTION AGREEMENT
------------------------------
This DISTRIBUTION AGREEMENT ("Agreement") is dated as of the 27th of
September, 1999 and entered into by and between Plug Power, L.L.C., a limited
liability company organized and existing under the laws of the State of Delaware
("Company"), with its principal place of business at 968 Albany-Shaker Road,
Latham, New York 12110, and DTE Energy Technologies, Inc., a company organized
and existing under the laws of the State of Michigan ("Distributor"), with its
principal place of business at 37849 Interchange Drive, Farmington Hills, MI
48335.
BACKGROUND STATEMENTS
WHEREAS, the Company owns all right, title and interest in certain fuel
cells with capacities of 2 kilowatts and higher, as is set out more fully in
Exhibit 1; and
WHEREAS, Edison Development Corporation has assigned all of its right,
title, and interest in a previous Distribution Agreement between Plug Power,
L.L.C. and Edison Development Corporation, dated June 27, 1997, to DTE Energy
Technologies, Inc., an entity that is 80% or more owned or controlled by an
entity that is 80% or more owned or controlled by DTE Energy Company; and
WHEREAS, DTE Energy Technologies, Inc. (Distributor) has agreed in writing
to all obligations and restrictions on Distributor contained in that
Distribution Agreement as it may be amended from time to time; and
WHEREAS, the Distributor in consideration for and in reliance of the grant
of the exclusive distributorship hereunder has or will expend considerable time
and funds to establish a distribution network, plant and facilities and training
its support and sales staff; and
WHEREAS, the parties desire Distributor to act in certain circumstances as
Company's exclusive distributor for the Products to certain entities within the
United States as hereinunder specified.
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinunder set forth, and other good and valuable consideration the receipt and
sufficiency of which is acknowledged, the parties agree as follows:
1. APPOINTMENT.
-----------
a. Upon execution of this Agreement, Company hereby appoints Distributor
as Company's Exclusive independent distributor during the term of this Agreement
to promote and assist Company in the sale of Products which are developed by
Plug Power, to end-users for stationary applications in the Territory, as that
term is defined below, and subject to the terms and conditions provided herein.
For purposes of this Agreement, unless otherwise clear from the context,
"Products" collectively means Pre-Commercial Product as specified on Exhibit 3
attached to this Agreement and Commercial Product as specified on Exhibit 4
attached to this Agreement.
b. When the Company develops a specification for a commercial version of
a stationary, stand-alone product for a new market, Company shall endeavor to
deliver the specifications to Distributor at least six months prior to expected
commercial production of such product, and Company shall notify Distributor of
the expected beginning date for commercial production. The term "stand-alone"
shall mean a packaged system substantially ready for a specific end-user
purpose, as opposed to a sub-system or component which is intended to be
combined with other parts or components and then packaged as a system for a
specific end-user purpose. Distributor shall develop a marketing plan for the
new product, including sales estimates and expected minimum sales obligations
within three months of the delivery of the specifications and share the
marketing plan with Company on a
1
<PAGE>
confidential basis. Upon presentation of the marketing plan to the Company the
parties shall negotiate in good faith to determine a reasonable minimum sales
obligation for the new product. Upon agreement to the minimum sales obligation,
Exhibit 4 shall be amended to include the new product developed by Company. If
commercial production begins less than three months after delivery of the
specifications, and Distributor is unfairly prejudiced thereby in terms of
ability to meet sales objectives as defined in the marketing plan, parties agree
to adjust Distributor's sales obligations in a reasonable fashion.
c. Upon execution of this Agreement, Distributor hereby accepts the
appointment, subject to the terms and conditions as provided herein.
2. TERRITORY.
---------
a. Distributor's territory for this Agreement shall mean the states of
Michigan, Ohio, Indiana and Illinois ("Territory").
b. Without the prior written consent of the Company, Distributor shall
not solicit nor seek customers for the Products, or establish or maintain a
branch facility or distribution facility for the sale, servicing, warehousing,
or storage of the Products or spare parts thereof outside the Territory.
c. Distributor may appoint or contract with third parties (e.g., agents,
distributors, sub-distributors) in connection with the marketing and sale of the
Products and the provision of services within the Territory, so long as any
compensation to such third parties shall be the sole responsibility of
Distributor. Any such agent, distributor, or sub-distributor shall be subject
to, and agree to be bound by, the applicable terms and conditions of this
Agreement. If any anticipatory breach or any breach of the terms and conditions
of this Agreement by such agents, distributors or sub-distributors is
identified, Distributor will take all reasonable actions to rectify such
anticipatory breach or breach of this Agreement.
d. Other than as expressly set forth in this Agreement, the Distributor
and its agents, distributors, and sub-distributors shall not have any
restrictions, in any manner, with respect to the resale of any Product acquired
pursuant to this Agreement, including restrictions as to the price at which they
may elect to resell any such Product.
e. DISTRIBUTOR MAY NOT SELL OR DISTRIBUTE THE PRODUCTS TO ANY ENTITY FOR
TRANSPORTATION APPLICATIONS.
3. EXCLUSIVITY.
-----------
a. The term "Exclusive" means that under this Agreement as long as
Distributor is in full compliance with its obligations, including the Minimum
Sales Obligations set forth in Section 5 herein, Company shall not appoint any
other distributor, agent, representative, or dealer for promotion or sale of the
Products to end users for stationary applications in the Territory and shall
further refrain from selling Products to end users for stationary applications
in the Territory directly, other than through Distributor.
b. Company shall not be responsible for transgression of Distributor's
exclusive rights hereunder by third parties not controlled by Company, but shall
not sell or deliver Products to any other party outside of the Territory if
Company has knowledge that the Products are to be sold or distributed by or
through another party in the Territory.
c. Distributor shall not sell or deliver Products to any other party if
Distributor has knowledge that the Products are to be sold or distributed by or
through such party outside the Territory.
2
<PAGE>
d. In the event that (i) Distributor is in default of its obligations
under this Agreement, or (ii) after January 1, 2010, then Company retains the
right, in addition to any other rights and remedies, to engage another
distributor, dealer, agent, or other such representative on a nonexclusive basis
for all or part of the Territory.
e. In the event that Distributor engages in the distribution of any fuel
cell product to any third party (including agents, distributors, sub-
distributors and end users) within the Territory that is competitive with the
Products, then the Company retains the right, in addition to any other rights
and remedies, to engage another distributor, dealer, agent, or other such
representative on a nonexclusive basis for all or part of the Territory.
4. PRICE OF PRODUCT.
----------------
a. Performance specifications for Pre-Commercial Product and for
Commercial Product are set forth on attached Exhibits 3 and 4, respectively.
The purchase price for Commercial Product and replacement parts purchased by
Distributor shall be [***], but nothing shall preclude the parties from mutually
agreeing on a different price. [***] available to Distributor hereunder shall be
on similar payment terms as to other distributors, customers or agents,
including pricing to GE as defined in the existing Distributor Agreement with GE
Fuel Cell Systems, L.L.C. dated February 2, 1999, and set forth in Schedule A,
Terms and Conditions of Purchase/Sale, but shall not include pricing
arrangements offered by Company to others involving the leasing or financing of
the Products, revenue sharing, or other hybrid arrangements with Company's
distributors, customers, or agents.
b. The Terms and Conditions for all orders for the Pre-Commercial Product
and for Commercial Product shall be subject to all of the provisions set forth
in this Section 4 and in Schedule A, and as otherwise negotiated between the
parties.
5. MINIMUM SALES OBLIGATION.
------------------------
a. A Product will be deemed ready for market at the time it meets the
commercial Product specifications set forth in Exhibit 4. The parties
anticipate commercial production to begin by January 1, 2001; provided, however,
for purposes of this Agreement, commercial production shall be considered to
have begun when the first such Product is shipped by Company for commercial
installation and Company notifies Distributor the first commercial Product has
been shipped.
Distributor shall have a Minimum Sales Obligation (subject to adjustments
pursuant to sections 5.a, 5.c, and 7.g) of:
[***] units in 2001
[***] units in 2002
[***] units in 2003
If commercial production is delayed beyond January 1, 2001, the Minimum
Sales Obligation shall be extended one month for each full or partial month of
delay in the start of commercial production. Prior to October 1, 2003, the
Parties shall negotiate in good faith to determine Minimum Sales Obligations for
the following two years. If the Parties do not reach agreement on a Minimum
Sales Obligation for any 12-month period, then Distributor must be one of the
top three sellers of residential fuel cell systems in the Territory for such
period, based on the dollar value of new units and replacement parts actually
sold by Distributor. If Distributor fails to be one of the top three sellers in
the Territory, as defined herein, then this Agreement shall automatically become
nonexclusive.
3
<PAGE>
A long-term lease shall be deemed a sale for the purposes of this sub-
Section.
On the first business day of each month beginning three months prior to
expected commercial production, Distributor will provide Company with a 12-month
rolling forecast of monthly purchases for the period beginning 3 months hence.
Each of the first 3 months of Distributor's forecast will be a firm order.
Distributor's forecast for the final 9 months of each forecast period is for
Company's planning purposes only. Distributor, at its sole discretion, may
change the monthly purchase forecast in any month in the final 9-month forecast
period by any amount.
b. Except as otherwise provided for in Sections 5.c and 5.d below, if
Distributor fails to meet its Minimum Sales Obligation this Agreement shall
automatically and without notice become nonexclusive, provided however, that
such failure to meet the Minimum Sales Obligation shall not be the basis for
default under, or the termination of, this Agreement. If Company cannot meet
Distributor's shipment requirements as evidenced by valid purchase orders, the
Company and Distributor will mutually agree to adjust the Minimum Sales
Obligations accordingly.
c. Any failure of Distributor to meet its Minimum Sales Obligation in any
year which is caused by Company's failure to deliver a competitive product (as
defined below) shall not be grounds for Company to reduce or modify
Distributor's distribution rights in any way. For the purposes of this
Agreement, Distributor will consider the following factors, in good faith and as
a whole, in determining whether the Products are competitive: (i) the wholesale
price of Products is no more than 5% greater than such price for non-Company
manufactured PEM fuel cell systems; (ii) the lifetime end user cost per kWh
generated by the Products is no more than 5% greater than that for non-Company
manufactured PEM fuel cell systems, where end user cost per kWh will be
calculated as the wholesale price plus installation, lifetime operations and
maintenance cost, divided by the kWh consumption over the operating life; (iii)
the Product's emissions (NOx and CO measured in parts per million), noise (in
Db), and size (in cubic feet) are no more than 10% greater than that for non-
Company manufactured PEM fuel cell systems; and (iv) the Product's reliability
is no more than 5% worse than that for non-Company manufactured PEM fuel cell
systems.
d. If Distributor fails to meet its Minimum Sales Obligation, Company
will notify Distributor of that fact within 90 days of the end of the calendar
year for which Distributor fails to meet its Minimum Sales Obligation. However,
if Distributor's total sales exceed [***] of the Minimum Sales Obligation set
forth above for any of the years 2001, 2002, or 2003, or as adjusted per Section
5.a, Company shall not name an additional distributor. For example, if
Distributor achieves greater than [***] of the Minimum Sales Obligation for the
year 2001, Company may not name an additional Distributor. This provision shall
apply only one time during the first three years, such that if it applies to
sales in 2001, it shall not apply to sales in 2002 or 2003; and if it applies to
sales in 2002, it shall not apply to sales in 2003.
e. Distributor agrees to purchase, on a take-or-pay basis, a minimum of
[***] Test and Evaluation Units at a cost of [***] each, provided they are
shipped prior to December 31, 1999. Distributor further agrees to purchase
[***] Pre-Commercial Products at a cost of [***] each for the first
[***] and [***] each for the remaining [***], provided they are shipped
at least five (5) months prior to the shipment of the first commercial unit.
6. DISTRIBUTOR COVENANTS AND REPRESENTATIONS.
-----------------------------------------
Distributor represents and warrants, to Company (its members, agents,
officers, directors) and agrees:
4
<PAGE>
a. To use its best efforts to market and sell Products and provide
services within the Territory. Distributor shall maintain, at its own expense,
such office space and facilities, and hire and train such personnel as
Distributor may deem necessary to carry out its obligations under the Agreement.
b. During the term of this Agreement to use its best efforts to achieve
the Minimum Sales Obligation as defined and specified in Section 5 of this
Agreement.
c. Except as otherwise provided in this Agreement, to bear all expenses
associated with Distributor's marketing and sale of Pre-Commercial and
Commercial Product and the provision of services under this Agreement.
d. To spend a minimum of [***] on technical research and marketing
during the period beginning January 1, 1999 and ending July 1, 2001 or six (6)
months following commercial production, whichever comes later. No later than
one (1) year prior to expected commercial production, Distributor shall prepare
for confidential review by Company a marketing and services development schedule
which will include milestones and objective measures of progress toward the
January 1, 2001 Product release. Distributor shall make available to Company on
a confidential basis all market and product intelligence gathered as a result of
its research and marketing, as related to the sale and use of the Products,
including but not limited to product applications, customer response, and
customer demand.
e. In conjunction with Company's obligations in Section 7.f, Distributor
shall be responsible for the administration and field work necessary to obtain
any regulatory approvals for Distributor to conduct its operations in the
Territory. Distributor shall provide assistance to the Company in order to
assist Company in complying with registration requirements in the Territory,
obtain such other approvals from governmental authorities of the Territory as
may be necessary to comply with any and all governmental laws, regulations, and
orders that may be applicable to Distributor by reason of the execution of this
Agreement, and assist Company in taking those actions necessary for Distributor
to be registered as Company's independent distributor with any governmental
authority. Without limiting the foregoing, Distributor shall furnish Company
with such documentation as Company may request to confirm Distributor's
compliance with this Section, and Distributor agrees that it shall not engage in
any course of conduct that would cause Company to be in violation of the laws of
any jurisdiction within the Territory. Distributor shall comply fully with, and
shall be solely responsible for all safety standards, health code requirements
and regulations, specifications, and other requirements imposed by law,
regulation, or order in the Territory and applicable to the marketing and sale
of the Products and to the provision of services provided by Distributor.
f. Not to (i) disassemble, decompile or otherwise reverse engineer the
Product or otherwise attempt to learn the ideas underlying the Product; (ii)
take any action contrary to Company's license granted to Distributor, except as
expressly and unambiguously allowed under this Agreement; (iii) copy, modify or
enhance the Product; or (iv) allow others to do any of the foregoing.
g. To advertise and promote the Products labeled with Company's name
and trademarks ("Branding Materials"). Distributor shall provide Company with
all such Branding Materials for Company's approval prior to their use. Company
shall not unreasonably withhold its approval of the Branding Materials.
Distributor shall not design the Branding Materials in such a way as to either
imply or state that Distributor's relationship with Company is other than that
of an independent distributor.
h. TO KEEP COMPANY INFORMED AS TO ANY PROBLEMS ENCOUNTERED WITH THE
PRODUCTS AND ANY RESOLUTIONS ARRIVED AT FOR THOSE PROBLEMS, AND TO COMMUNICATE
PROMPTLY TO COMPANY ANY AND ALL MODIFICATIONS, DESIGN CHANGES OR IMPROVEMENTS OF
5
<PAGE>
THE PRODUCT SUGGESTED BY ANY CUSTOMER, EMPLOYEE OR AGENT. DISTRIBUTOR FURTHER
AGREES THAT COMPANY SHALL HAVE AND IS HEREBY ASSIGNED ANY AND ALL RIGHT, TITLE
AND INTEREST IN AND TO ANY SUCH SUGGESTED MODIFICATIONS, DESIGN CHANGES, OR
IMPROVEMENTS OF THE PRODUCT, WITHOUT THE PAYMENT OF ANY ADDITIONAL CONSIDERATION
THEREFOR EITHER TO DISTRIBUTOR, OR ITS EMPLOYEES, AGENTS OR CUSTOMERS.
DISTRIBUTOR WILL ALSO PROMPTLY NOTIFY COMPANY OF ANY INFRINGEMENT OF ANY
TRADEMARKS OR OTHER PROPRIETARY RIGHTS RELATING TO THE PRODUCT.
i. To carry out all sales promotion work and solicitation of sales for
the Products diligently, using its reasonable efforts for the account of
Company. These efforts shall include, but shall not in any way be limited to:
(i) advertising and promoting the Products effectively and requiring its
distributors or sub-distributors to do the same; (ii) ordering and keeping a
representative selection of Company's up-to-date promotional sales literature,
technical bulletins, price lists, manuals, catalogues and other promotion
materials in good condition; (iii) maintaining the equipment and facilities to
enable Distributor to demonstrate the Products to potential new customers; and
(iv) assisting Company in securing and protecting any property rights in
connection with the Products in the Territory.
j. To not make any representations as to the Products other than those,
if any, contained in written information and data provided by Company.
Distributor shall be totally responsible for any of its representations and
shall hold Company harmless from any claims and expenses, including, but not
limited to, reasonable attorneys' fees, resulting from such unauthorized
representations.
k. To not manufacture the Products, nor engage any entity other than
Company to do so.
7. COMPANY'S OBLIGATIONS.
---------------------
a. Company shall supply Distributor with copies of brochures, catalogues,
technical specification sheets, and promotional sales literature and such other
information or materials as Company, in its judgment, reasonably believes will
assist Distributor in promoting and assisting in the sale and acceptance of the
Products in the Territory. These items shall be conveyed in English, unless the
parties otherwise agree from time to time. Company shall, at its expense,
provide Distributor with reasonable amounts of technical materials (e.g.,
drawings, schematics, installation manuals, operating procedures, available
marketing materials, field test results, training materials) and available
information regarding Product applications and customer demand pertaining to the
Products as are requested by Distributor from time to time. All such
information and materials will be furnished in the English language.
b. Company shall notify Distributor of any material changes in or
affecting the Products, projected delivery dates and schedule changes that may
reasonably be expected to affect the obligations of Distributor hereunder;
provided, that no such notification shall relieve Company of any of its
obligations hereunder.
c. Company shall, if required by Distributor, provide Distributor with
reasonable access to and assistance of its technical support personnel. Such
assistance shall be without charge to Distributor except as may be otherwise
mutually agreed.
d. Company shall maintain in effect at all times product liability
insurance with policy limits as described in Exhibit 5 attached hereto, as such
Exhibit may be revised from time to time upon the mutual agreement of Company
and Distributor, and Distributor shall be named as an additional insured to each
such policy. In the event Company cannot obtain such insurance on commercially
reasonable terms, Company shall notify Distributor, and Distributor may
terminate the Agreement.
6
<PAGE>
e. If Company is contacted, or has been contacted, by third parties
concerning the possible purchase of Products by customers in the Territory,
Company will use its best efforts to refer such persons to the Distributor,
provided Company has not named any additional or replacement distributor in the
Territory in accordance with this Agreement.
f. Company shall comply with all registration requirements in the
Territory that are applicable to the Company, obtain such other approvals from
governmental authorities of the Territory as may be necessary to comply with any
and all governmental laws, regulations, and orders that may be applicable to
Company by reason of the execution of this Agreement, and take those actions
necessary for Distributor to be registered as Company's independent distributor
with any governmental authority. At Distributor's request, Company shall
perform all tests for all certifications (regulatory or otherwise) required to
certify use of the Products sold by Distributor for stand-alone and/or grid-
connected stationary power applications. Without limiting the foregoing,
Company shall furnish Distributor with such documentation as Distributor may
request to confirm Company's compliance with this Section; and Company agrees
that it shall not engage in any course of conduct that would cause Distributor
to be in violation of the laws of any jurisdiction within the Territory.
g. Company will use its best efforts to maintain a minimum annual Product
production required to fill any of Distributor's firm purchase orders; provided
that Distributor is in compliance with this Agreement and proceeds to develop
the infrastructure necessary to market, sell, and provide services to the volume
of Products equal to the Distributor's Minimum Sales Obligations. If Company is
unable to maintain annual Product production required to fill Distributor's firm
purchase orders, Company will ship a pro rata share of Product to Distributor,
based on Distributor's firm purchase orders, as compared to firm purchase orders
from other distributors.
h. Company shall comply fully with, and shall be solely responsible for,
all safety standards, health code requirements and regulations, specifications,
and other requirements imposed by law, regulation, or order in the Territory,
that are applicable to the design, manufacturing, and testing of the Products
and the provision of services by Company. Company shall establish and maintain
a program, to the mutual satisfaction of the Company and Distributor, in order
to create ongoing product design, manufacturing, testing, inspection, and other
safety and quality-related processes that are adequate to assure the safety and
reliability of Company's Products.
i. Company shall include the name of Distributor in its Internet home
page.
8. OPERATIONS AND EXPENSES.
-----------------------
The detailed operations of the Distributor under this Agreement are subject to
its sole control and management, subject to compliance with the terms hereof.
Distributor shall be responsible for all of its own expenses and employees.
Distributor agrees that it shall incur no expense chargeable to Company except
as may be specifically authorized, in advance, in writing, in each case by
Company nor shall any such expenses, including taxes, fees, or similar charges,
be deducted from any amounts due hereunder.
9. TRADEMARK LICENSE AND USE.
-------------------------
a. Company grants to Distributor a non-exclusive, non-transferable
license to use trademark(s) described in Exhibit 2 to this Agreement
("Authorized Trademarks") only in connection with the sale and promotion of the
Products in the Territory and during the term of and pursuant to the terms and
conditions of the Agreement. No trademark, trade name or other designations may
be used without the written consent of Company except as expressly provided in
this section. Company expressly allows Distributor to represent that it is a
distributor of the Products, including on the Products themselves, advertising
materials, stationary and letterhead. Company further
7
<PAGE>
expressly allows Distributor to co-brand the Products, so long as Company
branding and trading policies are not otherwise violated.
b. Distributor shall not assign or sub-license its rights to the
Authorized Trademarks to any other person or entity, except to agents,
distributors or sub-distributors. Any such assignment or sub-license to use
Authorized Trademarks to an agent, distributor or sub-distributor is subject to
the approval of Company, which approval shall not be unreasonably withheld.
Company shall have the right to control the nature and quality of the
Distributor's or sub-licensee's use of an Authorized Trademark to protect
Company's rights in the Authorized Trademarks.
c. Distributor shall not remove, change, obscure, or add to the labels,
markings, names or trademarks that Company has affixed to any of the Products.
d. Distributor shall not register, or attempt to register any of the
Authorized Trademarks in any jurisdiction without the express consent of
Company.
e. Distributor acknowledges and agrees that Company's remedy at law for
any breach of Company's obligations under this paragraph would be inadequate,
and agrees and consents that temporary and permanent injunctive relief may be
granted in any action or proceeding which may be brought to enforce any
provision hereof without the necessity of proof of actual damages.
10. CONFIDENTIALITY.
---------------
a. Without the prior written consent of Company, Distributor shall not
disclose to any third party any confidential business information or trade
secrets of Company, including but not limited to: the content of this
Agreement; customer lists; product specifications; product technical manuals;
service records; financial or sales reports; price lists; and any materials
related to Company's customers, financial performance, or design of the
Products, except for or in connection with any assignments permitted under
Sections 2.c and 15 hereof.
b. Distributor hereby acknowledges and agrees that the Products are
proprietary to Company. Distributor agrees to use utmost diligence to protect
the trade secrets and other proprietary rights of Company in the Products from
disclosure to third parties. Distributor shall also promote compliance with the
terms and conditions of this Agreement by employees and others with access to
the Products.
c. Distributor acknowledges and agrees that Company's remedy at law for
any breach of Company's obligations under this paragraph would be inadequate,
and agrees and consents that temporary and permanent injunctive relief may be
granted in any action or proceeding which may be brought to enforce any
provision hereof without the necessity of proof of actual damages.
d. Distributor's obligations under this confidentiality provision shall
survive termination or expiration of this Agreement.
11. ETHICAL CONDUCT.
---------------
Distributor expressly agrees that it shall not be entitled to any
commissions, fees, discounts or other compensation if facts are known to Company
that reasonably support a belief that Distributor is in violation of any of the
terms and conditions of paragraph 17 of this Agreement.
8
<PAGE>
12. LIMITED WARRANTY; DISCLAIMER; INDEMNITY.
---------------------------------------
a. Company will convey clear title to all Products to Distributor as
provided hereunder; Company warrants and represents that all Products sold
pursuant to this Agreement will be free from all material defects in workmanship
and material, and that the Products are provided in strict accordance with the
specifications set forth in Exhibits 3 and 4. Except as provided by this
Agreement, any attempt by the Company to limit, disclaim, or restrict any such
warranties or any remedies of Distributor, except as limited by this Agreement,
by acknowledgement or otherwise, in accepting or performing an order, shall be
null, void, and ineffective without Distributor's written consent. For
Commercial Product purchased under this Agreement, the foregoing warranties
shall apply for a period of the lesser of [***] months from the date of
installation or [***] months from delivery from Company to the
Distributor or Distributor's sub-distributors. For Pre-Commercial Product
purchased under this Agreement, the foregoing warranties shall apply for a
period of the lesser of [***] from the date of installation or [***]
months from delivery from Company to the Distributor or Distributor's sub-
distributors. For any component product purchased by the Company with a
warranty in excess of the terms described above, the Company shall make such
extended warranty coverage available to the Distributor for the relevant
component. The foregoing warranties are conditioned upon (a) proper storage,
handling, transportation, installation, use, repair, and maintenance, and
conformance with any reasonable recommendations of the Company; and (b)
Distributor promptly notifying the Company of any defects and, if required,
promptly making the Commercial Product or Pre-Commercial Product available for
correction. The foregoing warranties are provided at no cost to the Distributor
or the Distributor's customers.
If any Product fails to meet the foregoing warranties during the warranty
periods set forth above, the Company shall correct any such failure by either
(a) repairing the defective Product, or (b) replacing the defective Product at
its sole option. All costs associated with such repair or replacement,
including transportation costs, shall be the sole responsibility of the Company,
subject to the limitations set forth in the service agreement described in the
next paragraph.
Distributor will provide the labor, transportation, and other services necessary
for such repairs and replacements pursuant to a Service Agreement that will be
mutually agreed upon between Company and Distributor. Such Service Agreement
shall contain terms and conditions not less favorable to Distributor than the
terms and conditions of similar service agreements with other distributors of
Company's Products. Distributor and Company will negotiate the terms and
conditions of the Service Agreement in good faith. If such Service Agreement is
not agreed to by July 1, 2000, then this Agreement shall become non-exclusive
unless the parties otherwise mutually agree. The Service Agreement will set
forth limits on Company's reimbursement to Distributor for labor,
transportation, and other services. The Service Agreement will also set forth a
warranty approval process that will include pre-approval of major warranty
claims prior to commencement of work by the Distributor, submission of all
warranty claims for review and approval by the Company, and return of all parts
subject to warranty claims to the Company.
For Commercial Product, Company will provide Distributor with the option of
purchasing an extension to the initial warranty period. Such additional warranty
will be for [***] years beyond the termination of the initial warranty period,
and will cover [***]. The price for such warranty extension, if purchased, is
expected to be a maximum of [***] for Commercial Product purchased during the
first [***] of commercial production, and [***] for Commercial Product purchased
thereafter, to be paid as a lump sum at the time of purchase. The Company may
increase the price for warranty
9
<PAGE>
extensions by a commercially reasonable amount if, in the good faith judgement
of the Company, such increase is necessary based on prototype testing and repair
experience.
For Pre-Commercial Product, Company will provide Distributor with the option of
purchasing an extension to the initial warranty period. Such additional
warranty will be for [***] beyond the termination of the initial warranty
period, and Company will provide a firm price no later than October 1, 1999.
THE WARRANTIES SET FORTH IN THIS SECTION ARE IN LIEU OF ALL OTHER WARRANTIES,
WHETHER ORAL, WRITTEN, EXPRESS, OR IMPLIED, INCLUDING WITHOUT LIMITATION IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THE
COMPANY'S WARRANTY OBLIGATIONS AND DISTRIBUTOR'S REMEDIES UNDER THIS SECTION ARE
SOLELY AND EXCLUSIVELY AS STATED HEREIN.
b. The above warranty does not extend to any Product that is modified or
altered, is not maintained to Company's maintenance recommendations, is operated
in a manner other than that specified by Company, has its serial number removed
or altered or is treated with abuse, negligence or other improper treatment
(including, without limitation, use outside the recommended environment).
c. Distributor may extend its own product warranty to its customers
provided Distributor alone shall be responsible to such customer thereof and
neither Distributor nor such customer shall have recourse against Company with
respect thereto. Distributor hereby agrees to indemnify and hold Company
harmless from any and against all claims, actions, losses, damages, costs,
liabilities and expenses (including reasonable attorney's fees) based upon any
express or implied warranty made by Distributor to any customer.
13. LIMITED LIABILITY.
-----------------
EXCEPT AS SET FORTH IN SECTION 12, COMPANY WILL NOT BE LIABLE TO
DISTRIBUTOR OR THIRD PARTY WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT
UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY, OR OTHER LEGAL OR EQUITABLE
THEORY FOR (I) ANY AMOUNTS IN EXCESS IN THE AGGREGATE, OF THE AMOUNTS PAID TO
COMPANY HEREUNDER DURING THE TWELVE-MONTH PERIOD PRIOR TO DATE THE CAUSE OF
ACTION AROSE OR (II) ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS OR BUSINESS OPPORTUNITIES) OR (III) COST OF PROCUREMENT OF SUBSTITUTE
GOODS, TECHNOLOGY, OR SERVICES. COMPANY SHALL HAVE NO LIABILITY FOR ANY FAILURE
OR DELAY DUE TO MATTERS BEYOND ITS REASONABLE CONTROL.
14. RELATIONSHIP OF PARTIES.
-----------------------
The parties hereto expressly understand and agree that Distributor is an
independent contractor in the performance of each and every part of this
Agreement, is solely responsible for all of its employees and agents and its
labor costs and expenses arising in connection therewith and is responsible for
and will indemnify, defend and hold Company harmless from any and all claims,
liabilities, damages, debts, settlements, costs, attorneys' fees, expenses, and
liabilities of any type whatsoever that may arise on account of Distributor's
activities, or those of its employees or agents, including, without limitation,
providing unauthorized representations or warranties (or failing to disclose all
limitations on warranties and liabilities set forth herein on behalf of Company)
to its customers or breaching any term, representation or warranty of this
Agreement. Company is in no manner associated with or otherwise connected with
the actual performance of this Agreement on the part of Distributor, nor with
Distributor's employment of other persons or incurring of other expenses.
Except as expressly provided herein, Company shall have no right to exercise any
10
<PAGE>
control whatsoever over the activities or operations of Distributor.
15. ASSIGNMENT.
----------
Distributor shall not assign this Agreement or its rights under this Agreement
to any other third party, except that Distributor may assign its rights to and
-----------
obligations under this Agreement to any entity that is 80% or more owned or
controlled by DTE Energy Company or by any other entity that in turn is 80% or
more owned or controlled by DTE Energy Company, provided that any such entity
shall be bound, in writing, to all restrictions on Distributor contained in this
Agreement. Notwithstanding this Section 15, Distributor shall not transfer or
assign this Agreement or any of the rights and obligations contained herein to a
competitor of the Company without the prior written consent of the Company. In
addition, the Company may assign its rights pursuant to this Agreement to any
person who, by merger, operation of law, asset purchase or otherwise, acquires
substantially all of the business of the Company to which this Agreement
relates.
16. TERM AND TERMINATION.
--------------------
a. This Agreement may be terminated by a party for cause immediately by
written notice upon the occurrence of any of the following events:
i. If the other ceases to do business, or otherwise terminates it
business operations or if there is a material change in control of the other; or
ii. If the other shall fail to promptly secure or renew any license,
registration, permit, authorization or approval for the conduct of its business
in the manner contemplated by this Agreement or if any such license,
registration, permit, authorization or approval is revoked or suspended and not
reinstated within sixty days; or
iii. If the other materially breaches any material provision of this
Agreement and fails to substantially cure such breach within thirty days (ten
days in the case of a failure to pay) of written notice describing the breach;
or
iv. If the other becomes insolvent or seeks protection under any
bankruptcy, receivership, trust deed, creditors arrangement, composition or
comparable proceeding, or if any such proceeding is instituted against the other
(and not dismissed within 90 days); or
v. If Distributor breaches any other agreement or contract with
Company, and the breach is not cured within thirty days of written notice
describing the breach.
b. On termination or expiration of this Agreement for any reason
whatsoever including, but not limited to, termination or expiration by passage
of time or nonrenewal, the parties expressly agree that the following shall take
effect: (i) all rights granted to Distributor under or pursuant to this
Agreement shall immediately cease; (ii) all contracts and orders placed by
Distributor for the Products and accepted, but not filled or delivered by
Company as of the date of termination, shall be filled or delivered by Company
subject to the terms and conditions of this Agreement; (iii) all contracts or
orders for the Products not accepted by Company on or before the date of
termination shall, at Company's sole option, be canceled; (iv) Distributor shall
forthwith return to Company all promotional Sales information materials or
demonstration products that have been furnished by Company to Distributor during
the term of this Agreement, it being understood that no copies of these
foregoing materials may be retained by Distributor subsequent to the date of
termination or expiration of this Agreement; and (v) Company shall repurchase
from Distributor, at the then fair market
11
<PAGE>
value in the Territory, any Products and replacement parts purchased from
Company by Distributor for inventory or other purpose directly related to
furthering the purposes of this Agreement.
c. Distributor acknowledges and expressly agrees that Company shall not
be liable to Distributor, and Distributor hereby waives any claims for
compensation or damages of any kind or character whatsoever, whether on account
of the loss by Distributor of present or prospective compensation or anticipated
compensation, or of expenditures, investments or commitments made either in
connection therewith or in connection with the establishment, development or
maintenance of establishment, development or maintenance of Distributor's
business, or on account of any other cause or thing whatsoever.
d. Termination is not the sole remedy under this Agreement and, whether
or not termination is affected, all other remedies will remain available.
17. NO EXPORT.
---------
The Products shall not be distributed for export nor sold to the end users
for use outside the Territory. The parties further acknowledge and agree that
all actions taken by the parties in furtherance of fulfillment of this Agreement
shall be in full compliance with all applicable U.S. export control laws and
regulations, as they are amended from time to time. The parties recognize that
such laws may require, among other things, applying for export licenses for the
export of information ("Technical Data"). Failure to obtain such licenses or
otherwise comply with such laws could subject the parties to criminal sanctions
including imprisonment. It is further acknowledged that the export of Technical
Data, including the Products, software, know-how and other proprietary
information, is "deemed" by the U.S. government to be exported: (i) upon
transmission from the United States; (ii) upon oral release by a U.S. citizen in
a foreign country; or (iii) by release in the United States to non-U.S.
nationals.
18. AMENDMENT AND WAIVER.
--------------------
Except as otherwise expressly provided herein, any provision of this
Agreement may be amended and the observance of any provision of this Agreement
may be waived (either generally or any particular instance and either
retroactively or prospectively) only with the written consent of the parties.
19. GOVERNING LAW AND LEGAL ACTIONS.
-------------------------------
This Agreement shall be governed by and construed under the laws of the
State of Michigan and the United States without regard to conflicts of law
provisions. Unless waived by Company in writing for the particular instance
(which Company may do at its option), the sole jurisdiction and venue for
actions related to the subject matter hereof shall be the State of Michigan and
U.S. federal court for the Eastern District of Michigan. Both parties consent
to the exhibit jurisdiction and venue of such courts and agree that process may
be served in the manner provided herein for giving of notices or otherwise as
allowed by Michigan or federal law. In any action or proceeding to enforce
rights under this Agreement, the prevailing party shall be entitled to recover
costs and reasonable attorneys' fees.
20. FORCE MAJEURE.
-------------
Neither party shall be liable under this Agreement for any loss or damage
of any nature incurred as a result of any failures of delays in performance
because of any cause or circumstances beyond its control. This includes, but is
not limited to, any failure or delays in performance caused by any strikes,
lockouts, labor disputes, fires, acts of God or the public enemy, riots,
incendiaries, interference by civil or military authorities, compliance with the
laws, orders or policies of any government authority, delays in transit or
delivery on the part of transportation companies or failures
12
<PAGE>
of communication facilities or sources of raw materials. However, the party
claiming a Force Majeure Event must notify the other in writing within ten days
of the beginning of such an event, and no Force Majeure Event shall extend for a
period of greater than 45 days.
21. HEADINGS.
--------
Headings and captions are for convenience only and are not to be used in
the interpretation of this Agreement.
22. NOTICES.
-------
Any notices or other communications required or permitted hereunder shall
be in writing and shall be deemed sufficiently given if (i) delivered in person,
(ii) sent by recognized overnight courier, or (iii) by registered or certified
mail, postage prepaid, to the respective party at the address set out above or
to such other address any party shall have given notice in accordance with this
Section 22. Notices hand-delivered shall be deemed given the same day as
delivery-notices sent by overnight mail shall be deemed given the day following
delivery, and notices sent by mail shall be deemed given three business days
after the date posted, provided however, that any change of address shall be
effective only upon receipt.
23. ENTIRE AGREEMENT.
----------------
This Agreement supersedes all proposals and agreements whether oral or
written, all negotiations, conversations, or discussions between or among
parties relating to the subject matter of this Agreement and all past dealing or
industry custom.
24. SEVERABILITY.
------------
If any provision of this Agreement is held by a court of competent
jurisdiction to be illegal, invalid or unenforceable, that provision shall be
limited or eliminated to the minimum extent necessary so that this Agreement
shall otherwise remain in full force and effect and enforceable.
25. CORPORATE AUTHORITY.
-------------------
The individuals executing this Agreement on behalf of Company and
Distributor do each hereby warrant and represent that they respectively have
been and are on the date of this Agreement duly authorized by all necessary or
appropriate corporate action to execute this Agreement.
26. COUNTERPARTS.
------------
To facilitate execution, this Agreement may be executed in more than one
counterpart, each of which shall constitute an original and all of which shall
constitute one and the same Agreement.
27. FACSIMILE.
---------
Facsimile signatures to this Agreement shall be considered original
signatures.
28. BASIS OF BARGAIN.
----------------
EACH PARTY RECOGNIZES AND AGREES THAT THE WARRANTY DISCLAIMERS AND
LIABILITY
13
<PAGE>
AND REMEDY LIMITATIONS IN THIS AGREEMENT ARE MATERIAL, BARGAINED-FOR BASES OF
THIS AGREEMENT, AND THAT THEY HAVE BEEN TAKEN INTO ACCOUNT AND REFLECTED IN
DETERMINING THE CONSIDERATION TO BE GIVEN BY EACH PARTY UNDER THIS AGREEMENT AND
IN THE DECISION BY EACH PARTY TO ENTER INTO THIS AGREEMENT.
SIGNATURE PAGE FOLLOWS.
14
<PAGE>
DTE ENERGY TECHNOLOGIES, INC.
(a Michigan corporation)
By:
-----------------------------------
Its:
-----------------------------------
"Distributor"
PLUG POWER, L.L.C.
(a Delaware limited liability company)
By its Managing Member:
--------------------------------------
By:
-----------------------------------
Its:
-----------------------------------
"Company"
15
<PAGE>
EXHIBIT 1
The Products made by the Company are a range of fuel cell systems that are
capable of generating electricity through electrochemical reactions. The
components comprising the fuel cell systems include, but are not limited to, one
or more of the following whether used alone or in combination:
. A fuel processor that generates hydrogen gas and/or other gas(es).
. A fuel cell stack(s) that generates electricity through electrochemical
reactions.
. An inverter system to convert direct current electricity to alternating
current electricity.
. A system controller for operation of the fuel cell system or any component
thereof.
. An energy storage system.
. A heat exchanger.
16
<PAGE>
EXHIBIT 2
Authorized Trademarks
1. "Plug Power"
Stylized Plug Power Logo
17
<PAGE>
EXHIBIT 3
Pre-Commercial Product
Company Specifications
Note: Company and Distributor recognize that the definition of the Pre-
- -----------------------------------------------------------------------
Commercial Product (PCP) may change based on further analysis of residential
- ----------------------------------------------------------------------------
load profiles and field testing. If Company and Distributor mutually agree to
- -------------------------------------------------------------------------------
change the specifications set forth below, Company and Distributor will mutually
- --------------------------------------------------------------------------------
agree on the prices and purchase volumes set forth in Section 5.
- -----------------------------------------------------------------
Packaging:
PCP product design will be complete to the point where interfaces between
major components (e.g., stack, reformer, inverter, etc.) will be similar to that
of the final Product.
Certifications:
- ---------------
Certifications (e.g., UL, NFPA, AGA, FCC Class B) are not required for the
PCPs. However, PCPs must meet any customary local codes and regulations
required for field testing by Distributor's Customers. To the extent the test
site required preparation to meet local codes, any site improvements will be at
the Customer's expense.
Technology:
- -----------
Basic technology of all major PCP components will be the same as that of
the Commercial Product; however, suppliers and manufacturers of the major
components need not be the same as those for the Commercial Product.
Documentation:
- ---------------
PCPs must be shipped with sufficient documentation (e.g., installation
drawings, operating manuals, repair guides) to allow for start-up and Service by
individuals with a skill level comparable to a typical HVAC technician, after
such individual has completed the Company training program or a training program
approved by Company.
PCPs must be provided in strict accordance with samples, drawings, and/or
designs provided by Company and approved in writing by Company and Distributor.
Technical Support:
- ------------------
Company will make available by telephone to Distributor and its sub-
distributors PCU technical support during Company's normal business hours.
Company will also establish a 24-hour telephone number to accommodate emergency
calls from Distributor and its sub-distributors.
Shipping:
- ----------
Company will prepare all PCPs to allow for standard commercial shipment
(e.g., truck, rail, cargo ship) to Customer locations.
Monitoring & Diagnostics:
- -------------------------
18
<PAGE>
PCPs will be designed to accommodate remote monitoring and diagnostics
("RM&D") equipment (e.g., modems, data collection/storage). RM&D equipment will
be provided, installed, and operated at Distributor's or its Customers' expense.
At a minimum, the PCP control system will allow the RM&D equipment to monitor
the following parameters:
Current System Status
Output Power
Voltage
Current
Others - TBD*
Assumptions:
- ------------
Plug Power assumed the following in developing the specifications set forth
below:
Natural gas line pressure at [***] of water or greater; and
Average system usage of [***] kWh/year.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Specification PCP
- -------------------------------------------------------------------------------------------------
<S> <C>
kW output rating 7kW continuous, [***] operating design point,
[***]
all outputs [***]
- -------------------------------------------------------------------------------------------------
Voltage/frequency [***]
- -------------------------------------------------------------------------------------------------
Operating design point efficiency (i.e., [***]
efficiency at [***] kW output)
- -------------------------------------------------------------------------------------------------
Continuous output efficiency (i.e., [***]
efficiency at 7kW output)
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Phase [***]
- -------------------------------------------------------------------------------------------------
Fuel capability [***] [***]
unless notified by DISTRIBUTOR in
writing 12 months prior to PCP delivery)
- -------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------
Allowable fuel contaminants Must be able to operate on [***]
For NG:
Sulfur ___ TBD*
Alkalis ___ TBD*
Water ___ TBD*
Nitrogen ___ TBD*
Non-Methane Hydrocarbons ____ TBD*
Methane ___ TBD*
For LPG: _______ TBD*
For Methanol: _______ TBD*
- -------------------------------------------------------------------------------------------------
System make up water requirements Must be able to operate on [***]
Iron (PPM maximum) ___ TBD*
Calcium (PPM maximum) ___ TBD*
Chlorine (PPM maximum) ____ TBD*
Particulate (PPM maximum) ___ TBD*
Other ______ (PPM maximum) ____ TBD*
- -------------------------------------------------------------------------------------------------
Noise ____ dBa (TBD*) [***]
____ dBa (TBD*) [***]
- -------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------
Operating environment requirements Must be able to operate [***]
Humidity
Maximum ____% TBD*
Minimum ____% TBD*
Salt in Air
Maximum ____% TBD*
Minimum ____% TBD*
Particulate (e.g., pollen)
Maximum ____% TBD*
Minimum ____% TBD*
Other Cathode contaminant(s) (e.g.,
hydrocarbon vapor)
Maximum ____% TBD*
Minimum ____% TBD*
- -------------------------------------------------------------------------------------------------
Emissions - TBD*
NOx (NG) ____/____ (maximum/target)
CO (NG) ____/____ (maximum/target)
NOx (LPG) ____/____ (maximum/target)
CO (LPG) ____/____ (maximum/target)
NOx (Methanol) ____/____ (maximum/target)
CO (Methanol) ____/____ (maximum/target)
- -------------------------------------------------------------------------------------------------
Ambient temperature range [***]
- -------------------------------------------------------------------------------------------------
Altitude [***]
- -------------------------------------------------------------------------------------------------
Power conditioning system [***]
- -------------------------------------------------------------------------------------------------
Overload [***] [***]
- -------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------
Harmonics Harmonics at 7.0 kW continuous operation to
satisfy [***] for harmonic voltages.
Harmonics at [***] of non linear connected load
[***].
- -------------------------------------------------------------------------------------------------
Power quality (isolated)
- -------------------------------------------------------------------------------------------------
Voltage, steady state (up to 7.0 [***]
kW continuous)
- -------------------------------------------------------------------------------------------------
Voltage, transient (up to overload [***]
rating)
- -------------------------------------------------------------------------------------------------
Control [***]
- -------------------------------------------------------------------------------------------------
Communications [***] or similar as needed to establish
communications links
- -------------------------------------------------------------------------------------------------
Grid connection Suitable for isolated operation (via
a transfer switch) in a grid-connected site.
- -------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
<TABLE>
<S> <C>
MTB stack replacement TBD*
[***]
MTB system (i.e., PEM Fuel Cell- TBD*
Powered Generator Set) failure
- -------------------------------------------------------------------------------------------------
Performance degradation (e.g., TBD*
efficiency, output) [***]
- -------------------------------------------------------------------------------------------------
Non-fuel O&M ($/year up to first stack TBD*
replacement) at [***] kWh/year
- -------------------------------------------------------------------------------------------------
Product life with prescribed routine TBD*
maintenance (including stack [***]
replacement) at less than [***] kWh/year
- ---------------------------------------------------------------------------------------------
</TABLE>
* COMPANY and DISTRIBUTOR will mutually agree to the specific values for
these areas no later than October 1, 1999 (e.g., based on TEU lab and field-
testing).
23
<PAGE>
EXHIBIT 4
Commercial Product
Company Specifications
Note: Company and Distributor recognize that the specification of Commercial
- -----------------------------------------------------------------------------
Product may change based on further analysis of residential load profiles and
- -----------------------------------------------------------------------------
field testing. If Company and Distributor mutually agree to change the
- -----------------------------------------------------------------------
specifications set forth below, Company and Distributor will mutually agree on
- ------------------------------------------------------------------------------
the prices and the purchase volumes set forth in Section 5.
- -----------------------------------------------------------
Packaging:
- ----------
Product package size and weight must be suitable for installation indoor or
outside of a typical single family residence within the Territory.
Certifications:
- ---------------
Commercial Product, including packaging, must be compliant with all
requisite standards (e.g., UL, NFPA, AGA, FCC Class B, CE) within the Territory.
To the extent the installation site requires preparation to meet local codes,
any site improvements will be at the Customer's expense.
Interconnection:
- ----------------
Products will be capable of interconnection to the electrical system of a
typical single family residence; provided however that the Product will operate
isolated from the grid with the use of transfer switch ("stand-alone
operation"). The transfer switch will, in the event that the Product fails or
is interrupted, transfer the household load from the Product back to the utility
grid within no more than [***].
Should it be determined that the Distributor's Customers require an
interconnection scheme other than stand-alone operation (e.g., grid parallel),
Distributor and Company will jointly set the requirements of the new
interconnection scheme. To the extent the new interconnection scheme results in
an increase in Company's Product cost, Company will adjust Distributor's
transfer price proportionately.
Installation:
- -------------
Products must be in compliance with any applicable installation
requirements within the Territory.
Documentation:
- ---------------
Products must be shipped with sufficient documentation (e.g., installation
drawings, operating manuals, repair guides) to allow for start-up and Service by
individuals with a skill level comparable to a typical HVAC technician, after
such individual has completed the Company training program or a training program
approved by Company.
Products must be shipped with documentation sufficient for an average
homeowner to perform routine maintenance.
24
<PAGE>
Products must be provided in strict accordance with samples, drawings,
and/or designs provided by Company and approved in writing by Company and
Distributor.
25
<PAGE>
Technical Support:
- ------------------
Company will make available by telephone to Distributor and its sub-
distributors Product technical support during Company's normal business hours.
Company will also establish a 24-hour telephone number to accommodate emergency
calls from Distributor and its sub-distributors.
Shipping:
- ---------
Company will prepare all Products to allow for standard commercial shipment
(e.g., truck, rail, cargo ship) to Customer locations.
Monitoring & Diagnostics:
- -------------------------
Products will be designed to accommodate remote monitoring and diagnostics
(RM&D) equipment (e.g., modems, date collection/storage). RM&D equipment will
be provided, installed, and operated at Distributor's or its Customers' expense.
At a minimum, the Product control system will allow the RM&D equipment to
monitor the following parameters:
Current System Status
Output Power
Voltage
Current
Others - TBD*
Assumptions:
- -------------
Plug Power assumed the following in developing the specifications set forth
below:
Natural gas line pressure at [***] or greater; and
Average system usage of [***].
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Specification Product
- --------------------------------------------------------------------------------------------------
<S> <C>
kW output rating 7kW continuous, [***] operating design point,
[***]
all outputs [***]
- --------------------------------------------------------------------------------------------------
Voltage/frequency [***]
- --------------------------------------------------------------------------------------------------
Operating design point efficiency (i.e., [***]
efficiency at [***] output)
- --------------------------------------------------------------------------------------------------
Continuous output efficiency (i.e., [***]
efficiency at 7kW output)
- --------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------
<S> <C>
Phase [***]
- --------------------------------------------------------------------------------------------------
Fuel capability [***]
- --------------------------------------------------------------------------------------------------
Allowable fuel contaminants Must be able to operate on [***]
For NG:
Sulfur ___ TBD*
Alkalis ___ TBD*
Water ___ TBD*
Nitrogen ___ TBD*
Non-Methane Hydrocarbons ____ TBD*
Methane ___ TBD*
For LPG: _______ TBD*
For Methanol: _______ TBD*
- --------------------------------------------------------------------------------------------------
System make up water requirements Must be able to operate on [***]
- --------------------------------------------------------------------------------------------------
Iron (PPM maximum) ___ TBD*
Calcium (PPM maximum) ___ TBD*
Chlorine (PPM maximum) ____ TBD*
Particulate (PPM maximum) ___ TBD*
Other(s) ______ (PPM maximum) ____ TBD*
- --------------------------------------------------------------------------------------------------
Noise ____ dBa (TBD*) [***]
____ dBa (TBD*) [***]
- --------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------
<S> <C>
Operating environment requirements Must be able to operate [***]
Humidity
maximum ____% TBD*
minimum ____% TBD*
Salt in Air
maximum ____% TBD*
minimum ____% TBD*
Particulate (e.g., pollen)
maximum ____% TBD*
minimum ____% TBD*
Other Cathode contaminant(s) (e.g.,
hydrocarbon vapor)
maximum ____% TBD*
minimum ____% TBD*
- --------------------------------------------------------------------------------------------------
Emissions - TBD*
NOx (NG) ____/____ (maximum/target)
CO (NG) ____/____ (maximum/target)
NOx (LPG) ____/____ (maximum/target)
CO (LPG) ____/____ (maximum/target)
NOx (Methanol) ____/____ (maximum/target)
CO (Methanol) ____/____ (maximum/target)
- --------------------------------------------------------------------------------------------------
Ambient temperature range [***]
- --------------------------------------------------------------------------------------------------
Altitude [***]
- --------------------------------------------------------------------------------------------------
Power conditioning system [***]
- --------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------
<S> <C>
Overload [***] [***]
- --------------------------------------------------------------------------------------------------
Harmonics Harmonics at 7.0 kW continuous operation to
satisfy [***] for harmonic voltages. Harmonics
at [***] of non linear connected load will be
subject to [***].
- --------------------------------------------------------------------------------------------------
Power quality (isolated)
- --------------------------------------------------------------------------------------------------
Voltage, steady state (up to 7.0 kW [***]
continuous load)
- --------------------------------------------------------------------------------------------------
Voltage, transient (up to overload rating) [***]
- --------------------------------------------------------------------------------------------------
Control [***] or similar as needed to establish
communication links.
- --------------------------------------------------------------------------------------------------
Communications
[***]
- --------------------------------------------------------------------------------------------------
Grid Connection Suitable for isolated operation (via a transfer
switch) in a grid-connected site.
- --------------------------------------------------------------------------------------------------
MTB stack replacement [***]
- --------------------------------------------------------------------------------------------------
MTB system (i.e., PEM Fuel Cell- TBD*
Powered Generator Set) failure [***]
- --------------------------------------------------------------------------------------------------
Performance degradation (e.g., TBD*
efficiency, output ) [***]
- --------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------
<S> <C>
Non-fuel O&M ($/year up to first stack TBD*
replacement) at [***] kWh/year -----------
Labor Hours: [***]
Labor Rate: [***]
Total Labor: [***]
Materials: [***]
- --------------------------------------------------------------------------------------------------
Product life with prescribed routine TBD*
maintenance (including stack ([***])
replacement) [***] kWh/year)
- --------------------------------------------------------------------------------------------------
</TABLE>
* COMPANY and DISTRIBUTOR will mutually agree to the specific values for these
areas no later than June 1, 2000 (e.g., based on PCP lab and field testing).
30
<PAGE>
SCHEDULE A
TERMS AND CONDITIONS OF PURCHASE/SALE
1. PRICES AND PAYMENTS. Company's total price is FOB Company's designated,
continental U.S. manufacturing facility, unless otherwise agreed in writing by
Company and Distributor. All prices are exclusive of any applicable federal,
state or local sales, use, excise, or other similar taxes, provided, however,
that any such taxes to which Company becomes subject as a result of
manufacturing, having manufactured, or procuring Commercial Product or Pre-
Commercial Product, shall be borne by Company. No extra charges of any kind will
be allowed unless specifically agreed to in writing by Distributor. Unless
otherwise agreed between Company and Distributor, payments shall become due 45
days from receipt of invoice. In the event of delay in payment, Distributor will
pay Company a late fee equal to the lesser of [***], or [***], of any unpaid
balance per month of delay or [***]. Distributor must make payment when due,
without offset, deduction, or counterclaim, regardless of any claim by
Distributor.
2. DELIVERY AND PASSAGE OF TITLE. Time is of the essence on all purchase
orders, except that delivery dates will be framed in terms of calendar months
and orders will not be deemed late until after the end of such calendar month.
If Company fails to deliver the Commercial Product or Pre-Commercial Product or
to complete any services furnished hereunder, then Distributor shall be
entitled, in addition to the remedies available elsewhere under the Agreement,
to assess an amount, as liquidated damages for delay, equal to [***] of the
total dollar value of Distributor's order for the first month of delay and [***]
of the total dollar value of Distributor's order per subsequent month of delay;
provided, (a) that such remedy will be capped at [***], (b) if the order is more
than three months late, then Distributor may cancel the order, and (c) such
liquidated damages will only be available to Distributor for those orders to the
extent that Distributor has provided such remedy to its Customer. Company agrees
that such amounts are a reasonable pre-estimate of the damages which Distributor
may suffer as a result of such delay, and are to be assessed as liquidated
damages and not as a penalty. Where such liquidated damages are available to
Distributor, they shall be Distributor's only remedy for Company's failure to
make timely delivery, other than the remedies for non-performance expressly set
forth in this Agreement.
31
<PAGE>
Commercial Product or Pre-Commercial Product which will be shipped from
within the United States for delivery within the United States shall be
delivered FOB Company's designated, continental U.S. manufacturing facility,
unless otherwise agreed in writing by Company and Distributor. Commercial
Product or Pre-Commercial Product delivered to Distributor in advance of
schedule may be returned to Company at Company's expense. Title shall pass to
Distributor upon delivery to Distributor FOB Company's designated, continental
U.S. manufacturing facility.
3. CHANGES. The Distributor may at any time, in writing, request changes
within the general scope of a purchase order in (a) specifications, where the
Commercial Product or Pre-Commercial Product to be furnished are to be
specifically manufactured in accordance therewith, (b) method of shipment or
packing, or (c) place and time of delivery. Any such change shall be authorized
only by an amendment executed by Company and Distributor, with such amendment to
specify any additional expense, to be borne by Distributor.
4. INSPECTION. (a) All Commercial Product and Pre-Commercial Product
shall be subject to inspection and test by Distributor at reasonable times and
places upon reasonable notice, including the place of manufacture (which Company
shall use reasonable efforts to arrange, including providing for such access in
Company's purchase orders to the manufacturer); (b) If any inspection or test is
made on the premises of Company, then Company, without additional charge, shall
provide reasonable facilities and assistance for the safety and convenience of
inspectors in the performance of their duties, provided that the inspectors must
execute Company's standard confidentiality agreement, must abide by such
facility's rules and regulations, and must be covered by insurance for
occurrences other than due to Company's negligence or willful misconduct; and
(c) Company shall provide and maintain a program in order to create ongoing
product design, manufacturing, testing, inspection, and other safety and
quality-related processes that are adequate to assure the safety and reliability
of Company's Commercial Product and Pre-Commercial Product (the "Product Quality
and Safety Assurance Program"). Records of all inspection work by Company shall
be kept complete and available to Distributor during the performance of a
purchase order and for three (3) years from the date of such inspection.
Company will allow representatives of Distributor access to the facilities
involved in performing an order for purposes of reviewing the status and
progress of
32
<PAGE>
production.
5. REJECTION. If any of the Commercial Product, Pre-Commercial Product or
services (to the extent that Company is providing services) ordered are found by
Distributor within [***] of delivery to be defective, or otherwise not in
conformity with the requirements of the order, including any applicable
specifications, Company, at its option and sole discretion may: (a) instruct
Distributor to return such goods at Company's expense; (b) request that
Distributor, with Distributor's written approval, take such actions as may be
required to cure all defects and/or bring the Commercial Product or Pre-
Commercial Product into conformity with all requirements, in which event any
reasonable costs and expenses thereby incurred by Distributor, including
material and handling charges, will be at Company's expense; and (c) re-perform,
at Company's own expense, any defective portion of the services performed, to
the extent that Company is supplying services. Distributor must notify Company
in writing of such defect or non-conformity within [***] after delivery of the
Commercial Product or Pre-Commercial Product or performance of services, if
applicable, or Distributor's rights under this Section 5 shall be waived. The
remedies in this Section 5 shall be Distributor's exclusive remedies under this
Section 5.
33
<PAGE>
<TABLE>
<CAPTION>
Products (Commercial Units)
- --------------------------------------------------------------------------------
COMPANY'S
estimated
Cumulative # of
direct cost Price to units
# of units per unit
DISTRIBUTOR per purchased by
Lot # in Lot (US$) unit(US$)
GEFCS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 [***] [***] [***] [***]
2 [***] [***] [***] [***]
3 [***] [***] [***] [***]
4 [***] [***] [***] [***]
5 [***] [***] [***] [***]
6 [***] [***] [***] [***]
7 [***] [***] [***] [***]
8 [***] [***] [***] [***]
9 [***] [***] [***] [***]
10 [***] [***] [***] [***]
11 [***] [***] [***] [***]
12 [***] [***] [***] [***]
13 [***] [***] [***] [***]
14 [***] [***] [***] [***]
15 [***] [***] [***] [***]
16 [***] [***] [***] [***]
</TABLE>
Note: All numbers have been omitted and filed separately with the Securities
and Exchange Commission pursuant to Rule 406 under the Securities Act].
34
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
17 [***] [***] [***] [***]
18 [***] [***] [***] [***]
19 [***] [***] [***] [***]
20 [***] [***] [***] [***]
21 [***] [***] [***] [***]
22 [***] [***] [***] [***]
23 [***] [***] [***] [***]
24 [***] [***] [***] [***]
25 [***] [***] [***] [***]
26 [***] [***] [***] [***]
27 [***] [***] [***] [***]
28 [***] [***] [***] [***]
29 [***] [***] [***] [***]
30 [***] [***] [***] [***]
</TABLE>
Prices shown are for the Products as specified in EXHIBIT 4. Any modification
to the EXHIBIT 4 specification requested by Distributor that result in a change
to the Company's direct cost will cause Distributor's price to change by an
equal amount.
EXHIBIT 5
COMPANY'S INSURANCE
Company shall maintain in effect at all times during the Term of this Agreement
products liability insurance as set forth on the following certificate, with
Distributor named as additional insured.
(See Attached)
35
<PAGE>
EXHIBIT 10.33
PLUG POWER INC.
1999 STOCK OPTION AND INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
----------------------------------------
The name of the plan is the Plug Power Inc. 1999 Stock Option and Incentive
Plan (the "Plan"). The purpose of the Plan is to encourage and enable the
officers, employees, Independent Directors and other key persons (including
consultants) of Plug Power Inc. (the "Company") and its Subsidiaries upon whose
judgment, initiative and efforts the Company largely depends for the successful
conduct of its business to acquire a proprietary interest in the Company. It is
anticipated that providing such persons with a direct stake in the Company's
welfare will assure a closer identification of their interests with those of the
Company, thereby stimulating their efforts on the Company's behalf and
strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
"Administrator" is defined in Section 2(a).
"Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Stock Appreciation Rights, Deferred Stock Awards, Restricted Stock
Awards, Unrestricted Stock Awards, Performance Share Awards and Dividend
Equivalent Rights.
"Board" means the Board of Directors of the Company.
"Cause" means, except as provided in an individual agreement or by the
Committee, a vote of the Board of Directors resolving that the participant
should be dismissed as a result of (i) any material breach by the participant of
any agreement to which the participant and the Company are parties, (ii) any act
(other than retirement) or omission to act by the participant which may have a
material and adverse effect on the business of the Company or any Subsidiary or
on the participant's ability to perform services for the Company or any
Subsidiary, including, without limitation, the commission of any crime (other
than ordinary traffic violations), or (iii) any material misconduct or neglect
of duties by the participant in connection with the business or affairs of the
Company or any Subsidiary.
"Change of Control" is defined in Section 17.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
<PAGE>
"Committee" means the Committee of the Board referred to in Section 2.
"Covered Employee" means an employee who is a "Covered Employee" within the
meaning of Section 162(m) of the Code.
"Deferred Stock Award" means Awards granted pursuant to Section 8.
"Dividend Equivalent Right" means Awards granted pursuant to Section 12.
"Effective Date" means the date on which the Plan is approved by
stockholders as set forth in Section 19.
"Fair Market Value" of the Stock on any given date means the fair market
value of the Stock determined in good faith by the Administrator; provided,
--------
however, that if the Stock is admitted to quotation on the National Association
- -------
of Securities Dealers Automated Quotation System ("NASDAQ"), NASDAQ National
System or national securities exchange, the determination shall be made by
reference to market quotations. If there are no market quotations for such
date, the determination shall be made by reference to the last date preceding
such date for which there are market quotations. Notwithstanding the foregoing,
if the date for which Fair Market Value is determined is the first day when
trading prices for the Stock are reported on NASDAQ or trading on a national
securities exchange, the Fair Market Value shall be the "Price to the Public"
(or equivalent) set forth on the cover page for the final prospectus relating to
the Company's Initial Public Offering.
"Incentive Stock Option" means any Stock Option designated and qualified as
an "incentive stock option" as defined in Section 422 of the Code.
"Independent Director" means a member of the Board who is not also an
employee of the Company or any Subsidiary.
"Initial Public Offering" means the first fully underwritten, firm
commitment public offering pursuant to an effective registration statement under
the Act, other than on Forms S-4 or S-8 or their then equivalents, covering the
offer and sale by the Company of its Stock.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
"Option" or "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5.
"Performance Share Award" means Awards granted pursuant to Section 10.
2
<PAGE>
"Performance Cycle" means one or more periods of time, which may be of
varying and overlapping durations, as the Administrator may select, over which
the attainment of one or more performance criteria will be measured for the
purpose of determining a participant's right to and the payment of a Performance
Share Award, Restricted Stock Award or Deferred Stock Award.
"Restricted Stock Award" means Awards granted pursuant to Section 7.
"Stock" means the Common Stock, par value $0.01 per share, of the Company,
subject to adjustments pursuant to Section 3.
"Stock Appreciation Right" means any Award granted pursuant to Section 6.
"Subsidiary" means any corporation or other entity (other than the Company)
in any unbroken chain of corporations or other entities beginning with the
Company if each of the corporations or entities (other than the last corporation
or entity in the unbroken chain) owns stock or other interests possessing 50
percent or more of the economic interest or the total combined voting power of
all classes of stock or other interests in one of the other corporations or
entities in the chain.
"Unrestricted Stock Award" means any Award granted pursuant to Section 9.
SECTION 2. ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT
---------------------------------------------------------
PARTICIPANTS AND DETERMINE AWARDS
---------------------------------
(a) Committee. The Plan shall be administered by either the Board or a
---------
committee of not less than two Independent Directors (in either case, the
"Administrator").
(b) Powers of Administrator. The Administrator shall have the power and
-----------------------
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:
(i) to select the individuals to whom Awards may from time to time be
granted;
(ii to determine the time or times of grant, and the extent, if any,
of Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation
Rights, Restricted Stock Awards, Deferred Stock Awards, Unrestricted Stock
Awards, Performance Share Awards and Dividend Equivalent Rights, or any
combination of the foregoing, granted to any one or more participants;
(iii) to determine the number of shares of Stock to be covered by any
Award;
(iv) to determine and modify from time to time the terms and
conditions, including restrictions, not inconsistent with the terms of the
Plan, of any Award, which
3
<PAGE>
terms and conditions may differ among individual Awards and participants,
and to approve the form of written instruments evidencing the Awards;
(v) to accelerate at any time the exercisability or vesting of all or
any portion of any Award;
(vi) subject to the provisions of Section 5(a)(ii), to extend at any
time the period in which Stock Options may be exercised;
(vii) to determine at any time whether, to what extent, and under what
circumstances distribution or the receipt of Stock and other amounts
payable with respect to an Award shall be deferred either automatically or
at the election of the participant and whether and to what extent the
Company shall pay or credit amounts constituting interest (at rates
determined by the Administrator) or dividends or deemed dividends on such
deferrals; and
(viii) at any time to adopt, alter and repeal such rules, guidelines
and practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in connection
with the Plan; and to otherwise supervise the administration of the Plan.
All decisions and interpretations of the Administrator shall be binding on
all persons, including the Company and Plan participants.
(c) Delegation of Authority to Grant Awards. The Administrator, in its
---------------------------------------
discretion, may delegate to the Chief Executive Officer of the Company all or
part of the Administrator's authority and duties with respect to the granting of
Awards at Fair Market Value, to individuals who are not subject to the reporting
and other provisions of Section 16 of the Act or "covered employees" within the
meaning of Section 162(m) of the Code. Any such delegation by the Administrator
shall include a limitation as to the amount of Awards that may be granted during
the period of the delegation and shall contain guidelines as to the
determination of the exercise price of any Stock Option or Stock Appreciation
Right, the conversion ratio or price of other Awards and the vesting criteria.
The Administrator may revoke or amend the terms of a delegation at any time but
such action shall not invalidate any prior actions of the Administrator's
delegate or delegates that were consistent with the terms of the Plan.
SECTION 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
----------------------------------------------------
(a) Stock Issuable. The maximum number of shares of Stock reserved and
--------------
available for issuance under the Plan shall be such aggregate number of shares
of Stock as does not exceed the sum of (i) 2,561,002 shares; plus (ii) as of the
first day of each January 1 and July 1
4
<PAGE>
thereafter, 16.4 percent of any net increase since the preceding July 1 or
January 1, as the case may be, in the total number of shares of Stock actually
outstanding; plus (iii) shares of Stock underlying awards under the Plug Power,
L.L.C. Membership Option Plan which are forfeited, cancelled, reacquired by the
Company, satisfied without the issuance of Stock or otherwise terminated (other
than be exercise) from time to time. Notwithstanding the foregoing, the maximum
number of shares of Stock for which Incentive Stock Options may be issued under
the Plan shall not exceed 2,561,002. For purposes of this limitation, the shares
of Stock underlying any Awards which are forfeited, cancelled, reacquired by the
Company, satisfied without the issuance of Stock or otherwise terminated (other
than by exercise) shall be added back to the shares of Stock available for
issuance under the Plan. Subject to such overall limitation, shares of Stock may
be issued up to such maximum number pursuant to any type or types of Award;
provided, however, that from and after the date the Company becomes subject to
the provisions of Section 162(m) of the Code, Stock Options or Stock
Appreciation Rights with respect to no more than 500,000 shares of Stock may be
granted to any one individual participant during any one calendar year period.
The shares available for issuance under the Plan may be authorized but unissued
shares of Stock or shares of Stock reacquired by the Company and held in its
treasury.
(b) Changes in Stock. If, as a result of any reorganization,
----------------
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar change in the Company's capital stock, the outstanding
shares of Stock are increased or decreased or are exchanged for a different
number or kind of shares or other securities of the Company, or additional
shares or new or different shares or other securities of the Company or other
non-cash assets are distributed with respect to such shares of Stock or other
securities, or, if, as a result of any merger or consolidation, sale of all or
substantially all of the assets of the Company, the outstanding shares of Stock
are converted into or exchanged for a different number or kind of securities of
the Company or any successor entity (or a parent or Subsidiary thereof), the
Administrator shall make an appropriate or proportionate adjustment in (i) the
maximum number of shares reserved for issuance under the Plan, (ii) the number
of Stock Options or Stock Appreciation Rights that can be granted to any one
individual participant, (iii) the number and kind of shares or other securities
subject to any then outstanding Awards under the Plan, (iv) the repurchase price
per share subject to each outstanding Restricted Stock Award, and (v) the price
for each share subject to any then outstanding Stock Options and Stock
Appreciation Rights under the Plan, without changing the aggregate exercise
price (i.e., the exercise price multiplied by the number of Stock Options and
Stock Appreciation Rights) as to which such Stock Options and Stock Appreciation
Rights remain exercisable. The adjustment by the Administrator shall be final,
binding and conclusive. No fractional shares of Stock shall be issued under the
Plan resulting from any such adjustment, but the Administrator in its discretion
may make a cash payment in lieu of fractional shares.
The Administrator may also adjust the number of shares subject to
outstanding Awards and the exercise price and the terms of outstanding Awards to
take into consideration material changes in accounting practices or principles,
extraordinary dividends, acquisitions or dispositions of stock or property or
any other event if it is determined by the Administrator
5
<PAGE>
that such adjustment is appropriate to avoid distortion in the operation of the
Plan, provided that no such adjustment shall be made in the case of an Incentive
Stock Option, without the consent of the participant, if it would constitute a
modification, extension or renewal of the Option within the meaning of Section
424(h) of the Code.
(c) Mergers and Other Transactions. In the case of and subject to the
------------------------------
consummation of (i) the dissolution or liquidation of the Company, (ii) the sale
of all or substantially all of the assets of the Company on a consolidated basis
to an unrelated person or entity, (iii) a merger, reorganization or
consolidation in which the outstanding shares of Stock are converted into or
exchanged for a different kind of securities of the successor entity and the
holders of the Company's outstanding voting power immediately prior to such
transaction do not own a majority of the outstanding voting power of the
successor entity immediately upon completion of such transaction, or (iv) the
sale of all of the Stock of the Company to an unrelated person or entity (in
each case, a "Covered Transaction"), all Options and Stock Appreciation Rights
that are not exercisable immediately prior to the effective date of the Covered
Transaction shall become fully exercisable as of the effective date of the
Covered Transaction and all other Awards with conditions and restrictions
relating solely to the passage of time and continued employment shall become
fully vested and nonforfeitable as of the effective date of the Covered
Transaction, except as the Administrator may otherwise specify with respect to
particular Awards. Upon the consummation of the Covered Transaction, the Plan
and all outstanding Awards granted hereunder shall terminate, unless provision
is made in connection with the Covered Transaction for the assumption of Awards
heretofore granted, or the substitution of such Awards with new Awards of the
successor entity or parent thereof, with appropriate adjustment as to the number
and kind of shares and, if appropriate, the per share exercise prices, as
provided in Section 3(b) above. In the event of such termination, each optionee
shall be permitted, within a specified period of time determined by the
Administrator prior to consummation of the Covered Transaction, to exercise all
outstanding Options and Stock Appreciation Rights held by such optionee,
including those that will become exercisable upon the effectiveness of the
Covered Transaction; provided, however, that the exercise of Options and Stock
Appreciation Rights not exercisable prior to the effectiveness of the Covered
Transaction shall be subject to the consummation of the Covered Transaction.
(d) Substitute Awards. The Administrator may grant Awards under the Plan
-----------------
in substitution for stock and stock based awards held by employees of another
corporation who become employees of the Company or a Subsidiary as the result of
a merger or consolidation of the employing corporation with the Company or a
Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Administrator may direct that the
substitute awards be granted on such terms and conditions as the Administrator
considers appropriate in the circumstances. Any substitute Awards granted under
the Plan shall not count against the share limitation set forth in Section 3(a).
6
<PAGE>
SECTION 4. ELIGIBILITY
-----------
Participants in the Plan will be such full or part-time officers and other
employees, Independent Directors and key persons (including consultants and
prospective employees) of the Company and its Subsidiaries as are selected from
time to time by the Administrator in its sole discretion.
SECTION 5. STOCK OPTIONS
-------------
Any Stock Option granted under the Plan shall be in such form as the
Administrator may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock Options
or Non-Qualified Stock Options. Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary that is a "subsidiary corporation"
within the meaning of Section 424(f) of the Code. To the extent that any Option
does not qualify as an Incentive Stock Option, it shall be deemed a Non-
Qualified Stock Option.
No Incentive Stock Option shall be granted under the Plan after August 16,
2009.
(a) Stock Options Granted to Employees and Key Persons. The Administrator
--------------------------------------------------
in its discretion may grant Stock Options to eligible employees and key persons
of the Company or any Subsidiary. Stock Options granted pursuant to this
Section 5(a) shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms of
the Plan, as the Administrator shall deem desirable. If the Administrator so
determines, Stock Options may be granted in lieu of cash compensation at the
participant's election, subject to such terms and conditions as the
Administrator may establish.
(i) Exercise Price. The exercise price per share for the Stock
--------------
covered by a Stock Option granted pursuant to this Section 5(a) shall be
determined by the Administrator at the time of grant but shall not be less
than 100 percent of the Fair Market Value on the date of grant in the case
of Incentive Stock Options, or 85 percent of the Fair Market Value on the
date of grant, in the case of Non-Qualified Stock Options (other than
options granted in lieu of cash compensation). If an employee owns or is
deemed to own (by reason of the attribution rules of Section 424(d) of the
Code) more than 10 percent of the combined voting power of all classes of
stock of the Company or any parent or subsidiary corporation and an
Incentive Stock Option is granted to such employee, the option price of
such Incentive Stock Option shall be not less than 110 percent of the Fair
Market Value on the grant date.
(ii) Option Term. The term of each Stock Option shall be fixed by
-----------
the Administrator, but no Stock Option shall be exercisable more than ten
years after the date the option is granted. Notwithstanding the foregoing,
the rights of an employee, who at the time the option is granted is a
member of the Board, in an Option granted
7
<PAGE>
under this Section 5(a) shall terminate ten years from the date of grant
(subject to the five year limitation in the next sentence); provided,
however, that if such employee ceases to be an employee for Cause, such
rights shall terminate immediately on the date on which he ceases to be an
employee. If an employee owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than 10 percent of
the combined voting power of all classes of stock of the Company or any
parent or subsidiary corporation and an Incentive Stock Option is granted
to such employee, the term of such option shall be no more than five years
from the date of grant.
(iii) Exercisability; Rights of a Stockholder. Stock Options shall
---------------------------------------
become exercisable at such time or times, whether or not in installments,
as shall be determined by the Administrator at or after the grant date;
provided, however, that Stock Options granted in lieu of compensation shall
be exercisable in full as of the grant date. The Administrator may at any
time accelerate the exercisability of all or any portion of any Stock
Option. An optionee shall have the rights of a stockholder only as to
shares acquired upon the exercise of a Stock Option and not as to
unexercised Stock Options.
(iv) Method of Exercise. Stock Options may be exercised in whole or
------------------
in part, by giving written notice of exercise to the Company, specifying
the number of shares to be purchased. Payment of the purchase price may be
made by one or more of the following methods to the extent provided in the
Option Award agreement:
(A) In cash, by certified or bank check or other instrument
acceptable to the Administrator;
(B) Through the delivery (or attestation to the ownership) of
shares of Stock that have been purchased by the optionee on the open
market or that have been beneficially owned by the optionee for at
least six months and are not then subject to restrictions under any
Company plan. Such surrendered shares shall be valued at Fair Market
Value on the exercise date;
(C) By the optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable
to the Company for the purchase price; provided that in the event the
optionee chooses to pay the purchase price as so provided, the
optionee and the broker shall comply with such procedures and enter
into such agreements of indemnity and other agreements as the
Administrator shall prescribe as a condition of such payment
procedure; or
(D) By the optionee delivering to the Company a promissory note
if the Board has expressly authorized the loan of funds to the
optionee for the purpose of enabling or assisting the optionee to
effect the exercise of his Stock
8
<PAGE>
Option; provided that at least so much of the exercise price as
represents the par value of the Stock shall be paid other than with a
promissory note.
Payment instruments will be received subject to collection. The delivery
of certificates representing the shares of Stock to be purchased pursuant
to the exercise of a Stock Option will be contingent upon receipt from the
optionee (or a purchaser acting in his stead in accordance with the
provisions of the Stock Option) by the Company of the full purchase price
for such shares and the fulfillment of any other requirements contained in
the Stock Option or applicable provisions of laws. In the event an
optionee chooses to pay the purchase price by previously-owned shares of
Stock through the attestation method, the number of shares of Stock
transferred to the optionee upon the exercise of the Stock Option shall be
net of the number of shares attested to.
(v) Annual Limit on Incentive Stock Options. To the extent required
---------------------------------------
for "incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
shares of Stock with respect to which Incentive Stock Options granted under
this Plan and any other plan of the Company or its parent and subsidiary
corporations become exercisable for the first time by an optionee during
any calendar year shall not exceed $100,000. To the extent that any Stock
Option exceeds this limit, it shall constitute a Non-Qualified Stock
Option.
(b) Reload Options. At the discretion of the Administrator, Options
--------------
granted under the Plan may include a "reload" feature pursuant to which an
optionee exercising an option by the delivery of a number of shares of Stock in
accordance with Section 5(a)(iv)(B) hereof would automatically be granted an
additional Option (with an exercise price equal to the Fair Market Value of the
Stock on the date the additional Option is granted and with such other terms as
the Administrator may provide) to purchase that number of shares of Stock equal
to the sum of (i) the number delivered to exercise the original Option and (ii)
the number withheld to satisfy tax liabilities, with an Option term equal to the
remainder of the original Option term unless the Administrator otherwise
determines in the Award agreement for the original Option grant.
(c) Stock Options Granted to Independent Directors.
----------------------------------------------
(i) Grant of Options. The Administrator, in its discretion, may grant
----------------
Non-Qualified Stock Options to Independent Directors. Any such grant may
vary among individual Independent Directors.
(ii) Exercise; Termination.
---------------------
(A) Unless otherwise determined by the Administrator, an Option
granted under Section 5(c) shall be exercisable in full as of the
grant date. The rights of an Independent Director in an Option
granted under this Section 5(c) shall terminate ten years from the
date of grant; provided, however, that if the
9
<PAGE>
Independent Director ceases to be a member of the Board for Cause,
such rights shall terminate immediately on the date on which he ceases
to be a member of the Board.
(B) Options granted under this Section 5(c) may be exercised only
by written notice to the Company specifying the number of shares to be
purchased. Payment of the full purchase price of the shares to be
purchased may be made by one or more of the methods specified in
Section 5(a)(iv). An optionee shall have the rights of a stockholder
only as to shares acquired upon the exercise of a Stock Option and not
as to unexercised Stock Options.
(d) Non-transferability of Options. No Stock Option shall be transferable
------------------------------
by the optionee otherwise than by will or by the laws of descent and
distribution and all Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee, or by the optionee's legal representative or
guardian in the event of the optionee's incapacity. Notwithstanding the
foregoing, the Administrator, in its sole discretion, may provide in the Award
agreement regarding a given Option that the optionee may transfer his Non-
Qualified Stock Options to members of his immediate family, to trusts for the
benefit of such family members, or to partnerships in which such family members
are the only partners, provided that the transferee agrees in writing with the
Company to be bound by all of the terms and conditions of this Plan and the
applicable Option.
SECTION 6. STOCK APPRECIATION RIGHTS.
-------------------------
(a) Nature of Stock Appreciation Rights. A Stock Appreciation Right is an
-----------------------------------
Award entitling the recipient to receive an amount in cash or shares of Stock or
a combination thereof having a value equal to the excess of the Fair Market
Value of the Stock on the date of exercise over the exercise price Stock
Appreciation Right, which price shall not be less than 85 percent of the Fair
Market Value of the Stock on the date of grant (or more than the option exercise
price per share, if the Stock Appreciation Right was granted in tandem with a
Stock Option) multiplied by the number of shares of Stock with respect to which
the Stock Appreciation Right shall have been exercised, with the Administrator
having the right to determine the form of payment.
(b) Grant and Exercise of Stock Appreciation Rights. Stock Appreciation
-----------------------------------------------
Rights may be granted by the Administrator in tandem with, or independently of,
any Stock Option granted pursuant to Section 5 of the Plan. In the case of a
Stock Appreciation Right granted in tandem with a Non-Qualified Stock Option,
such Stock Appreciation Right may be granted either at or after the time of the
grant of such Option. In the case of a Stock Appreciation Right granted in
tandem with an Incentive Stock Option, such Stock Appreciation Right may be
granted only at the time of the grant of the Option.
10
<PAGE>
A Stock Appreciation Right or applicable portion thereof granted in tandem
with a Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Option.
(c) Terms and Conditions of Stock Appreciation Rights. Stock Appreciation
-------------------------------------------------
Rights shall be subject to such terms and conditions as shall be determined from
time to time by the Administrator, subject to the following:
(i) Stock Appreciation Rights granted in tandem with Options shall be
exercisable at such time or times and to the extent that the related Stock
Options shall be exercisable.
(ii) Upon exercise of a Stock Appreciation Right, the applicable
portion of any related Option shall be surrendered.
(iii) All Stock Appreciation Rights shall be exercisable during the
participant's lifetime only by the participant or the participant's legal
representative.
SECTION 7. RESTRICTED STOCK AWARDS
-----------------------
(a) Nature of Restricted Stock Awards. A Restricted Stock Award is an
---------------------------------
Award entitling the recipient to acquire, at par value or such other higher
purchase price determined by the Administrator, shares of Stock subject to such
restrictions and conditions as the Administrator may determine at the time of
grant ("Restricted Stock"). Conditions may be based on continuing employment
(or other business relationship) and/or achievement of pre-established
performance goals and objectives. The grant of a Restricted Stock Award is
contingent on the participant executing the Restricted Stock Award agreement.
The terms and conditions of each such agreement shall be determined by the
Administrator, and such terms and conditions may differ among individual Awards
and participants.
(b) Rights as a Stockholder. Upon execution of a written instrument
-----------------------
setting forth the Restricted Stock Award and payment of any applicable purchase
price, a participant shall have the rights of a stockholder with respect to the
voting of the Restricted Stock, subject to such conditions contained in the
written instrument evidencing the Restricted Stock Award. Unless the
Administrator shall otherwise determine, certificates evidencing the Restricted
Stock shall remain in the possession of the Company until such Restricted Stock
is vested as provided in Section 7(d) below, and the participant shall be
required, as a condition of the grant, to deliver to the Company a stock power
endorsed in blank.
(c) Restrictions. Restricted Stock may not be sold, assigned, transferred,
------------
pledged or otherwise encumbered or disposed of except as specifically provided
herein or in the Restricted Stock Award agreement. If a participant's
employment (or other business relationship) with the Company and its
Subsidiaries terminates for any reason, the Company
11
<PAGE>
shall have the right to repurchase Restricted Stock that has not vested at the
time of termination at its original purchase price, from the participant or the
participant's legal representative.
(d) Vesting of Restricted Stock. The Administrator at the time of grant
---------------------------
shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which the non-
transferability of the Restricted Stock and the Company's right of repurchase or
forfeiture shall lapse. Subsequent to such date or dates and/or the attainment
of such pre-established performance goals, objectives and other conditions, the
shares on which all restrictions have lapsed shall no longer be Restricted Stock
and shall be deemed "vested." Except as may otherwise be provided by the
Administrator either in the Award agreement or, subject to Section 15 below, in
writing after the Award agreement is issued, a participant's rights in any
shares of Restricted Stock that have not vested shall automatically terminate
upon the participant's termination of employment (or other business
relationship) with the Company and its Subsidiaries and such shares shall be
subject to the Company's right of repurchase as provided in Section 7(c) above.
(e) Waiver, Deferral and Reinvestment of Dividends. The Restricted Stock
----------------------------------------------
Award agreement may require or permit the immediate payment, waiver, deferral or
investment of dividends paid on the Restricted Stock.
SECTION 8. DEFERRED STOCK AWARDS
---------------------
(a) Nature of Deferred Stock Awards. A Deferred Stock Award is an Award
-------------------------------
of phantom stock units to a participant, subject to restrictions and conditions
as the Administrator may determine at the time of grant. Conditions may be
based on continuing employment (or other business relationship) and/or
achievement of pre-established performance goals and objectives. The grant of a
Deferred Stock Award is contingent on the participant executing the Deferred
Stock Award agreement. The terms and conditions of each such agreement shall be
determined by the Administrator, and such terms and conditions may differ among
individual Awards and participants. At the end of the deferral period, the
Deferred Stock Award, to the extent vested, shall be paid to the participant in
the form of shares of Stock.
(b) Election to Receive Deferred Stock Awards in Lieu of Compensation. The
-----------------------------------------------------------------
Administrator may, in its sole discretion, permit a participant to elect to
receive a portion of the cash compensation or Restricted Stock Award otherwise
due to such participant in the form of a Deferred Stock Award. Any such
election shall be made in writing and shall be delivered to the Company no later
than the date specified by the Administrator and in accordance with rules and
procedures established by the Administrator. The Administrator shall have the
sole right to determine whether and under what circumstances to permit such
elections and to impose such limitations and other terms and conditions thereon
as the Administrator deems appropriate.
(c) Rights as a Stockholder. During the deferral period, a participant
-----------------------
shall have no rights as a stockholder; provided, however, that the participant
may be credited with Dividend
12
<PAGE>
Equivalent Rights with respect to the phantom stock units underlying his
Deferred Stock Award, subject to such terms and conditions as the Administrator
may determine.
(d) Restrictions. A Deferred Stock Award may not be sold, assigned,
------------
transferred, pledged or otherwise encumbered or disposed of during the deferral
period.
(e) Termination. Except as may otherwise be provided by the Administrator
-----------
either in the Award agreement or, subject to Section 15 below, in writing after
the Award agreement is issued, a participant's right in all Deferred Stock
Awards that have not vested shall automatically terminate upon the participant's
termination of employment (or cessation of business relationship) with the
Company and its Subsidiaries for any reason.
SECTION 9. UNRESTRICTED STOCK AWARDS
-------------------------
Grant or Sale of Unrestricted Stock. The Administrator may, in its sole
-----------------------------------
discretion, grant (or sell at par value or such higher purchase price determined
by the Administrator) an Unrestricted Stock Award to any participant pursuant to
which such participant may receive shares of Stock free of any restrictions
("Unrestricted Stock") under the Plan. Unrestricted Stock Awards may be granted
or sold as described in the preceding sentence in respect of past services or
other valid consideration, or in lieu of cash compensation due to such
participant.
SECTION 10. PERFORMANCE SHARE AWARDS
------------------------
(a) Nature of Performance Share Awards. A Performance Share Award is an
----------------------------------
Award entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals. The Administrator may make Performance Share
Awards independent of or in connection with the granting of any other Award
under the Plan. The Administrator in its sole discretion shall determine
whether and to whom Performance Share Awards shall be made, the performance
goals, the periods during which performance is to be measured, and all other
limitations and conditions.
(b) Rights as a Stockholder. A participant receiving a Performance Share
-----------------------
Award shall have the rights of a stockholder only as to shares actually received
by the participant under the Plan and not with respect to shares subject to the
Award but not actually received by the participant. A participant shall be
entitled to receive a stock certificate evidencing the acquisition of shares of
Stock under a Performance Share Award only upon satisfaction of all conditions
specified in the Performance Share Award agreement (or in a performance plan
adopted by the Administrator).
(c) Termination. Except as may otherwise be provided by the Administrator
-----------
either in the Award agreement or, subject to Section 15 below, in writing after
the Award agreement is issued, a participant's rights in all Performance Share
Awards shall automatically terminate upon the participant's termination of
employment (or cessation of business relationship) with the Company and its
Subsidiaries for any reason.
13
<PAGE>
(d) Acceleration, Waiver, Etc. At any time prior to the participant's
-------------------------
termination of employment (or other business relationship) by the Company and
its Subsidiaries, the Administrator may in its sole discretion accelerate, waive
or, subject to Section 15, amend any or all of the goals, restrictions or
conditions applicable to a Performance Share Award.
SECTION 11. PERFORMANCE-BASED AWARDS TO COVERED EMPLOYEES
---------------------------------------------
Notwithstanding anything to the contrary contained herein, if any
Restricted Stock Award, Deferred Stock Award or Performance Share Award granted
to a Covered Employee is intended to qualify as "Performance-based Compensation"
under Section 162(m) of the Code and the regulations promulgated thereunder (a
"Performance-based Award"), such Award shall comply with the provisions set
forth below:
(a) Performance Criteria. The performance criteria used in performance
--------------------
goals governing Performance-based Awards granted to Covered Employees may
include any or all of the following: (i) the Company's return on equity,
assets, capital or investment, (ii) pre-tax or after-tax profit levels of the
Company or any Subsidiary, a division, an operating unit or a business segment
of the Company, or any combination of the foregoing; (iii) cash flow, funds from
operations or similar measure; (iv) total shareholder return; (v) changes in the
market price of the Stock; (vi) sales or market share; (vii) earnings per share,
(viii) the Company's achievement of project development milestones; or (ix) any
other performance criteria determined by the Committee at any time and in its
sole discretion.
(b) Grant of Performance-based Awards. With respect to each Performance-
---------------------------------
based Award granted to a Covered Employee, the Committee shall select, within
the first 90 days of a Performance Cycle (or, if shorter, within the maximum
period allowed under Section 162(m) of the Code) the performance criteria for
such grant, and the achievement targets with respect to each performance
criterion (including a threshold level of performance below which no amount will
become payable with respect to such Award). Each Performance-based Award will
specify the amount payable, or the formula for determining the amount payable,
upon achievement of the various applicable performance targets. The performance
criteria established by the Committee may be (but need not be) different for
each Performance Cycle and different goals may be applicable to Performance-
based Awards to different Covered Employees.
(c) Payment of Performance-based Awards. Following the completion of a
-----------------------------------
Performance Cycle, the Committee shall meet to review and certify in writing
whether, and to what extent, the performance criteria for the Performance Cycle
have been achieved and, if so, to also calculate and certify in writing the
amount of the Performance-based Awards earned for the Performance Cycle. The
Committee shall then determine the actual size of each Covered Employee's
Performance-based Award, and, in doing so, may reduce or eliminate the amount of
the Performance-based Award for a Covered Employee if, in its sole judgment,
such reduction or elimination is appropriate.
14
<PAGE>
(d) Maximum Award Payable. The maximum Performance-based Award payable to
---------------------
any one Covered Employee under the Plan for a Performance Cycle is 500,000
Shares (subject to adjustment as provided in Section 3(b) hereof).
SECTION 12. DIVIDEND EQUIVALENT RIGHTS
--------------------------
(a) Dividend Equivalent Rights. A Dividend Equivalent Right is an Award
--------------------------
entitling the recipient to receive credits based on cash dividends that would
have been paid on the shares of Stock specified in the Dividend Equivalent Right
(or other award to which it relates) if such shares had been issued to and held
by the recipient. A Dividend Equivalent Right may be granted hereunder to any
participant as a component of another Award or as a freestanding award. The
terms and conditions of Dividend Equivalent Rights shall be specified in the
grant. Dividend equivalents credited to the holder of a Dividend Equivalent
Right may be paid currently or may be deemed to be reinvested in additional
shares of Stock, which may thereafter accrue additional equivalents. Any such
reinvestment shall be at Fair Market Value on the date of reinvestment or such
other price as may then apply under a dividend reinvestment plan sponsored by
the Company, if any. Dividend Equivalent Rights may be settled in cash or
shares of Stock or a combination thereof, in a single installment or
installments. A Dividend Equivalent Right granted as a component of another
Award may provide that such Dividend Equivalent Right shall be settled upon
exercise, settlement, or payment of, or lapse of restrictions on, such other
award, and that such Dividend Equivalent Right shall expire or be forfeited or
annulled under the same conditions as such other award. A Dividend Equivalent
Right granted as a component of another Award may also contain terms and
conditions different from such other award.
(b) Interest Equivalents. Any Award under this Plan that is settled in
--------------------
whole or in part in cash on a deferred basis may provide in the grant for
interest equivalents to be credited with respect to such cash payment. Interest
equivalents may be compounded and shall be paid upon such terms and conditions
as may be specified by the grant.
(c) Termination. Except as may otherwise be provided by the Administrator
-----------
either in the Award agreement or, subject to Section 15 below, in writing after
the Award agreement is issued, a participant's rights in all Dividend Equivalent
Rights or interest equivalents shall automatically terminate upon the
participant's termination of employment (or cessation of business relationship)
with the Company and its Subsidiaries for any reason.
SECTION 13. TAX WITHHOLDING
---------------
(a) Payment by Participant. Each participant shall, no later than the date
----------------------
as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Administrator regarding payment of, any Federal, state, or
local taxes of any kind required by law to be withheld with respect to such
income. The Company and its Subsidiaries shall, to the extent permitted by law,
have the
15
<PAGE>
right to deduct any such taxes from any payment of any kind otherwise due to the
participant. The Company's obligation to deliver stock certificates to any
participant is subject to and conditioned on tax obligations being satisfied by
the participant.
(b) Payment in Stock. Subject to approval by the Administrator, a
----------------
participant may elect to have the required minimum tax withholding obligation
satisfied, in whole or in part, by (i) authorizing the Company to withhold from
shares of Stock to be issued pursuant to any Award a number of shares with an
aggregate Fair Market Value (as of the date the withholding is effected) that
would satisfy the withholding amount due, or (ii) transferring to the Company
shares of Stock owned by the participant with an aggregate Fair Market Value (as
of the date the withholding is effected) that would satisfy the withholding
amount due.
SECTION 14. TRANSFER, LEAVE OF ABSENCE, ETC.
-------------------------------
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or from
the Company to a Subsidiary, or from one Subsidiary to another; or
(b) an approved leave of absence for military service or sickness, or for
any other purpose approved by the Company, if the employee's right to re-
employment is guaranteed either by a statute or by contract or under the policy
pursuant to which the leave of absence was granted or if the Administrator
otherwise so provides in writing.
SECTION 15. AMENDMENTS AND TERMINATION
--------------------------
The Board may, at any time, amend or discontinue the Plan and the
Administrator may, at any time, amend or cancel any outstanding Award for the
purpose of satisfying changes in law or for any other lawful purpose, but no
such action shall adversely affect rights under any outstanding Award without
the holder's consent. If and to the extent determined by the Administrator to
be required by the Code to ensure that Incentive Stock Options granted under the
Plan are qualified under Section 422 of the Code or to ensure that compensation
earned under Awards qualifies as performance-based compensation under Section
162(m) of the Code, if and to the extent intended to so qualify, Plan amendments
shall be subject to approval by the Company stockholders entitled to vote at a
meeting of stockholders. Nothing in this Section 15 shall limit the
Administrator's authority to take any action permitted pursuant to Section 3(c).
SECTION 16. STATUS OF PLAN
--------------
With respect to the portion of any Award that has not been exercised and
any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Administrator shall otherwise expressly
determine in connection with any Award or Awards. In its sole discretion,
16
<PAGE>
the Administrator may authorize the creation of trusts or other arrangements to
meet the Company's obligations to deliver Stock or make payments with respect to
Awards hereunder, provided that the existence of such trusts or other
arrangements is consistent with the foregoing sentence.
SECTION 17. CHANGE OF CONTROL PROVISIONS
----------------------------
Upon the occurrence of a Change of Control as defined in this Section 17:
(a) Except as otherwise provided in the applicable Award agreement, each
outstanding Stock Option and Stock Appreciation Right shall automatically become
fully exercisable.
(b) Except as otherwise provided in the applicable Award Agreement,
conditions and restrictions on each outstanding Restricted Stock Award, Deferred
Stock Award and Performance Share Award which relate solely to the passage of
time and continued employment will be removed. Performance or other conditions
(other than conditions and restrictions relating solely to the passage of time
and continued employment) will continue to apply unless otherwise provided in
the applicable Award Agreement.
(c) "Change of Control" shall mean the occurrence of any one of the
following events:
(i) any "Person," as such term is used in Sections 13(d) and 14(d) of
the Act (other than (w) the Company, (x) any of its Subsidiaries, (y) any
trustee, fiduciary or other person or entity holding securities under any
employee benefit plan or trust of the Company or any of its Subsidiaries,
or (z) either of Edison Development Corporation, a Michigan corporation or
Mechanical Technology Incorporated, a New York corporation), together with
all "affiliates" and "associates" (as such terms are defined in Rule 12b-2
under the Act) of such person, shall become the "beneficial owner" (as such
term is defined in Rule 13d-3 under the Act), directly or indirectly, of
securities of the Company representing 25 percent or more of the combined
voting power of the Company's then outstanding securities having the right
to vote in an election of the Company's Board of Directors ("Voting
Securities") (in such case other than as a result of an acquisition of
securities directly from the Company); or
(ii) persons who, as of the Effective Date, constitute the Company's
Board of Directors (the "Incumbent Directors") cease for any reason,
including, without limitation, as a result of a tender offer, proxy
contest, merger or similar transaction, to constitute at least a majority
of the Board, provided that any person becoming a director of the Company
subsequent to the Effective Date shall be considered an Incumbent Director
if such person's election was approved by or such person was nominated for
election by either (A) a vote of at least a majority of the Incumbent
Directors or (B) a vote of at least a majority of the Incumbent Directors
who are members of a nominating
17
<PAGE>
committee comprised, in the majority, of Incumbent Directors; but provided
further, that any such person whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of members of the Board of Directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board, including by reason of agreement intended to avoid or settle any
such actual or threatened contest or solicitation, shall not be considered
an Incumbent Director; or
(iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company where the stockholders of the
Company, immediately prior to the consolidation or merger, would not,
immediately after the consolidation or merger, beneficially own (as such
term is defined in Rule 13d-3 under the Act), directly or indirectly,
shares representing in the aggregate more than 50 percent of the voting
shares of the corporation issuing cash or securities in the consolidation
or merger (or of its ultimate parent corporation, if any) (other than the
merger of Plug Power, L.L.C. with and into the Company), (B) any sale,
lease, exchange or other transfer (in one transaction or a series of
transactions contemplated or arranged by any party as a single plan) of all
or substantially all of the assets of the Company or (C) any plan or
proposal for the liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change of Control" shall not be deemed to
have occurred for purposes of the foregoing clause (i) solely as the result of
an acquisition of securities by the Company which, by reducing the number of
shares of Voting Securities outstanding, increases the proportionate number of
shares of Voting Securities beneficially owned by any person to 25 percent or
more of the combined voting power of all then outstanding Voting Securities;
provided, however, that if any person referred to in this sentence shall
- -------- -------
thereafter become the beneficial owner of any additional shares of Voting
Securities (other than pursuant to a stock split, stock dividend, or similar
transaction or as a result of an acquisition of securities directly from the
Company) and immediately thereafter beneficially owns 25 percent or more of the
combined voting power of all then outstanding Voting Securities, then a "Change
of Control" shall be deemed to have occurred for purposes of the foregoing
clause (i).
SECTION 18. GENERAL PROVISIONS
------------------
(a) No Distribution; Compliance with Legal Requirements. The Administrator
---------------------------------------------------
may require each person acquiring Stock pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange or similar
requirements have been satisfied. The Administrator may require the placing of
such stop-orders and restrictive legends on certificates for Stock and Awards as
it deems appropriate.
18
<PAGE>
(b) Delivery of Stock Certificates. Stock certificates to participants
------------------------------
under this Plan shall be deemed delivered for all purposes when the Company or a
stock transfer agent of the Company shall have mailed such certificates in the
United States mail, addressed to the participant, at the participant's last
known address on file with the Company.
(c) Other Compensation Arrangements; No Employment Rights. Nothing
-----------------------------------------------------
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of this
Plan and the grant of Awards do not confer upon any employee any right to
continued employment with the Company or any Subsidiary.
(d) Trading Policy Restrictions. Option exercises and other Awards under
---------------------------
the Plan shall be subject to such Company's insider trading policy, as in effect
from time to time.
SECTION 19. EFFECTIVE DATE OF PLAN
----------------------
This Plan shall become effective upon approval by the holders of a majority
of the votes cast at a meeting of stockholders at which a quorum is present or
by written consent of stockholders. Subject to such approval by the
stockholders and to the requirement that no Stock may be issued hereunder prior
to such approval, Stock Options and other Awards may be granted hereunder on and
after adoption of this Plan by the Board.
SECTION 20. GOVERNING LAW
-------------
This Plan and all Awards and actions taken thereunder shall be governed by,
and construed in accordance with, the laws of the State of Delaware, applied
without regard to conflict of law principles.
DATE APPROVED BY BOARD OF DIRECTORS: August 16, 1999
DATE APPROVED BY STOCKHOLDERS: August 16, 1999
19
<PAGE>
EXHIBIT 10.34
PLUG POWER INC.
EMPLOYEE STOCK PURCHASE PLAN
The purpose of the Plug Power Inc. Employee Stock Purchase Plan ("the
Plan") is to provide eligible employees of Plug Power Inc. (the "Company") and
certain of its subsidiaries with opportunities to purchase shares of the
Company's common stock, par value $0.01 per share (the "Common Stock"). One
million (1,000,000) shares of Common Stock in the aggregate have been approved
and reserved for this purpose. The Plan is intended to constitute an "employee
stock purchase plan" within the meaning of Section 423(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), and shall be interpreted in
accordance with that intent.
1. Administration. The Plan will be administered by the person or
--------------
persons (the "Administrator") appointed by the Company's Board of Directors (the
"Board") for such purpose. The Administrator has authority to make rules and
regulations for the administration of the Plan, and its interpretations and
decisions with regard thereto shall be final and conclusive. No member of the
Board or individual exercising administrative authority with respect to the Plan
shall be liable for any action or determination made in good faith with respect
to the Plan or any option granted hereunder.
2. Offerings. The Company will make one or more offerings to eligible
---------
employees to purchase Common Stock under the Plan ("Offerings"). Unless
otherwise determined by the Administrator, the initial Offering will begin on
January 1, 2000 and will end on the following April 30, 2000 (the "Initial
Offering"). Thereafter, unless otherwise determined by the Administrator, an
Offering will begin on the first business day occurring on or after each May 1
<PAGE>
and November 1 and will end on the last business day occurring on or before the
following October 31 and April 30, respectively. The Administrator may, in its
discretion, designate a different period for any Offering, provided that no
Offering shall exceed six months in duration or overlap any other Offering.
3. Eligibility. All employees of the Company (including employees who
-----------
are also directors of the Company) and all employees of each Designated
Subsidiary (as defined in Section 11) are eligible to participate in any one or
more of the Offerings under the Plan, provided that as of the first day of the
applicable Offering (the "Offering Date") they are customarily employed by the
Company or a Designated Subsidiary for more than twenty (20) hours a week.
4. Participation. An employee eligible on any Offering Date may
-------------
participate in such Offering by submitting an enrollment form to his appropriate
payroll location at least fifteen (15) business days before the Offering Date
(or by such other deadline as shall be established for the Offering). The form
will (a) state a whole percentage to be deducted from his Compensation (as
defined in Section 11) per pay period, (b) authorize the purchase of Common
Stock for him in each Offering in accordance with the terms of the Plan and (c)
specify the exact name or names in which shares of Common Stock purchased for
him are to be issued pursuant to Section 10. An employee who does not enroll in
accordance with these procedures will be deemed to have waived his right to
participate. Unless an employee files a new enrollment form or withdraws from
the Plan, his deductions and purchases will continue at the same percentage of
Compensation for future Offerings, provided he remains
2
<PAGE>
eligible. Notwithstanding the foregoing, participation in the Plan will neither
be permitted nor be denied contrary to the requirements of the Code.
5. Employee Contributions. Each eligible employee may authorize payroll
----------------------
deductions at a minimum of one percent (1%) up to a maximum of ten percent (10%)
of his Compensation for each pay period. The Company will maintain book
accounts showing the amount of payroll deductions made by each participating
employee for each Offering. No interest will accrue or be paid on payroll
deductions.
6. Deduction Changes. Except as may be determined by the Administrator
-----------------
in advance of an Offering, an employee may not increase or decrease his payroll
deduction during any Offering, but may increase or decrease his payroll
deduction with respect to the next Offering (subject to the limitations of
Section 5) by filing a new enrollment form at least fifteen (15) business days
before the next Offering Date (or by such other deadline as shall be established
for the Offering). The Administrator may, in advance of any Offering, establish
rules permitting an employee to increase, decrease or terminate his payroll
deduction during an Offering.
7. Withdrawal. An employee may withdraw from participation in the Plan
----------
by delivering a written notice of withdrawal to his appropriate payroll
location. The employee's withdrawal will be effective as of the next business
day. Following an employee's withdrawal, the Company will promptly refund to
him his entire account balance under the Plan (after payment for any Common
Stock purchased before the effective date of withdrawal). Partial withdrawals
are not permitted. The employee may not begin participation again during the
3
<PAGE>
remainder of the Offering, but may enroll in a subsequent Offering in accordance
with Section 4.
8. Grant of Options. On each Offering Date, the Company will grant to
----------------
each eligible employee who is then a participant in the Plan an option
("Option") to purchase on the last day of such Offering (the "Exercise Date"),
at the Option Price hereinafter provided for, (a) a number of shares of Common
Stock, which number shall not exceed the number of whole shares which is less
than or equal to $12,500 divided by the closing price per share of Common Stock
on the Offering Date, or (b) such other lesser maximum number of shares of
Common Stock as shall have been established by the Administrator in advance of
the Offering. The purchase price for each share purchased under such Option (the
"Option Price") will be 85% of the Fair Market Value of the Common Stock on the
Offering Date or the Exercise Date, whichever is less.
Notwithstanding the foregoing, no employee may be granted an Option
hereunder if such employee, immediately after the Option was granted, would be
treated as owning stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any
Parent or Subsidiary (as defined in Section 11). For purposes of the preceding
sentence, the attribution rules of Section 424(d) of the Code shall apply in
determining the stock ownership of an employee, and all stock which the employee
has a contractual right to purchase shall be treated as stock owned by the
employee. In addition, no employee may be granted an Option which permits his
rights to purchase Common Stock under the Plan, and any other employee stock
purchase plan of the Company and its Parents and Subsidiaries, to accrue at a
rate which exceeds $25,000 of the Fair Market Value of Common Stock (determined
on the option grant date or dates) for each calendar year in which the Option
4
<PAGE>
is outstanding at any time. The purpose of the limitation in the preceding
sentence is to comply with Section 423(b)(8) of the Code.
9. Exercise of Option and Purchase of Shares. Each employee who
-----------------------------------------
continues to be a participant in the Plan on the Exercise Date shall be deemed
to have exercised his Option on such date and shall acquire from the Company
such number of whole shares of Common Stock reserved for the purpose of the Plan
as his accumulated payroll deductions on such date will purchase at the Option
Price, subject to any other limitations contained in the Plan. Any amount
remaining in an employee's account at the end of an Offering solely by reason of
the inability to purchase a fractional share will be carried forward to the next
Offering; any other balance remaining in an employee's account at the end of an
Offering will be refunded to the employee promptly.
10. Issuance of Certificates. Certificates representing shares of Common
------------------------
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or in the name of a broker authorized by the
employee to be his, or their, nominee for such purpose.
11. Definitions.
-----------
The term "Compensation" means the amount of base pay, prior to salary
reduction pursuant to either Section 125 or 401(k) of the Code, but excluding
overtime, commissions, incentive or bonus awards, allowances and reimbursements
for expenses such as relocation allowances or travel expenses, income or gains
on the exercise of Company stock options, and similar items.
5
<PAGE>
The term "Designated Subsidiary" means any present or future Subsidiary (as
defined below) that has been designated by the Board to participate in the Plan.
The Board may so designate any Subsidiary, or revoke any such designation, at
any time and from time to time, either before or after the Plan is approved by
the stockholders.
The term "Fair Market Value of the Common Stock" on any given date means
the fair market value of the Common Stock determined in good faith by the
Administrator; provided, however, that if the Common Stock is admitted to
quotation on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ"), NASDAQ National Market or national securities exchange, the
determination shall be made by reference to market quotations. If there are no
market quotations for such date, the determination shall be made by reference to
the last date preceding such date for which there are market quotations.
The term "Parent" means a "parent corporation" with respect to the Company,
as defined in Section 424(e) of the Code.
The term "Subsidiary" means a "subsidiary corporation" with respect to the
Company, as defined in Section 424(f) of the Code.
12. Rights on Termination of Employment. If a participating employee's
-----------------------------------
employment terminates for any reason before the Exercise Date for any Offering,
no payroll deduction will be taken from any pay due and owing to the employee
and the balance in his account will be paid to him or, in the case of his death,
to his designated beneficiary as if he had withdrawn from the Plan under Section
7. If an employee is transferred to any corporation other than the Company or a
Designated Subsidiary, or if the corporation that employs him,
6
<PAGE>
having been a Designated Subsidiary, ceases to be a Designated Subsidiary, then
such employee will be deemed to have terminated employment for this purpose.
13. Special Rules. Notwithstanding anything herein to the contrary, the
-------------
Administrator may adopt special rules applicable to the employees of a
particular Designated Subsidiary, whenever the Administrator determines that
such rules are necessary or appropriate for the implementation of the Plan in a
jurisdiction where such Designated Subsidiary has employees; provided that such
rules are consistent with the requirements of Section 423(b) of the Code. Such
special rules may include (by way of example, but not by way of limitation) the
establishment of a method for employees of a given Designated Subsidiary to fund
the purchase of shares other than by payroll deduction, if the payroll deduction
method is prohibited by local law or is otherwise impracticable. Any special
rules established pursuant to this Section 13 shall, to the extent possible,
result in the employees subject to such rules having substantially the same
rights as other participants in the Plan.
14. Optionees Not Stockholders. Neither the granting of an Option to an
--------------------------
employee nor the deductions from his pay shall constitute such employee a holder
of the shares of Common Stock covered by an Option under the Plan until such
shares have been purchased by and issued to him.
15. Rights Not Transferable. Rights under the Plan are not transferable
-----------------------
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
16. Application of Funds. All funds received or held by the Company under
--------------------
the Plan may be combined with other corporate funds and may be used for any
corporate purpose.
7
<PAGE>
17. Adjustment in Case of Changes Affecting Common Stock. In the event of
----------------------------------------------------
a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common Stock, the number of shares approved for the Plan, and the
share limitation set forth in Section 8, shall be increased proportionately, and
such other adjustment shall be made as may be deemed equitable by the
Administrator. In the event of any other change affecting the Common Stock,
such adjustment shall be made as may be deemed equitable by the Administrator to
give proper effect to such event.
18. Amendment of the Plan. The Board may at any time, and from time to
---------------------
time, amend the Plan in any respect, except that without the approval, within
twelve (12) months of such Board action, by the holders of a majority of the
shares of Common Stock present or represented and entitled to vote at a meeting
of stockholders, no amendment shall be made increasing the number of shares
approved for the Plan or making any other change that would require stockholder
approval in order for the Plan, as amended, to qualify as an "employee stock
purchase plan" under Section 423(b) of the Code.
19. Insufficient Shares. If the total number of shares of Common Stock
-------------------
that would otherwise be purchased on any Exercise Date plus the number of shares
purchased under previous Offerings under the Plan exceeds the maximum number of
shares issuable under the Plan, the shares then available shall be apportioned
among participants in proportion to the amount of payroll deductions accumulated
on behalf of each participant that would otherwise be used to purchase Common
Stock on such Exercise Date.
8
<PAGE>
20. Termination of the Plan. The Plan may be terminated at any time by
-----------------------
the Board. Upon termination of the Plan, all amounts in the accounts of
participating employees shall be promptly refunded.
21. Governmental Regulations. The Company's obligation to sell and
------------------------
deliver Common Stock under the Plan is subject to obtaining all governmental
approvals required in connection with the authorization, issuance, or sale of
such stock.
The Plan shall be governed by Delaware law except to the extent that such
law is preempted by federal law.
22. Issuance of Shares. Shares may be issued upon exercise of an Option
------------------
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
23. Tax Withholding. Participation in the Plan is subject to any minimum
---------------
required tax withholding on income of the participant in connection with the
Plan. Each employee agrees, by entering the Plan, that the Company and its
Subsidiaries shall have the right to deduct any such taxes from any payment of
any kind otherwise due to the employee, including shares issuable under the
Plan.
24. Notification Upon Sale of Shares. Each employee agrees, by entering
--------------------------------
the Plan, to give the Company prompt notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased.
25. Effective Date and Approval of Shareholders. The Plan shall take
-------------------------------------------
effect on January 1, 2000.
DOCSB\603624.3
9
<PAGE>
EXHIBIT 10.36
FORM OF REGISTRATION RIGHTS AGREEMENT
-------------------------------------
This Registration Rights Agreement (this "Agreement") is entered into as of
November __, 1999 by and among Plug Power Inc., a Delaware corporation (the
"Company"), and each of the parties executing a signature page hereto (each a
"Holder" and collectively the "Holders").
WHEREAS, the Holders are the owners of the number of shares of the common
stock, par value $.01 per share, of the Company (the "Common Stock") set forth
opposite their respective names on Exhibit A attached hereto (collectively, the
---------
"Shares").
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, and other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
The parties hereby agree as follows:
SECTION 1. DEFINITIONS.
-----------
As used in this Agreement, the following terms have the following meanings:
"Commission" means the Securities and Exchange Commission.
----------
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
------------
time to time, or any successor statute, and the rules and regulations of the
Commission promulgated thereunder.
"Person" means any individual, corporation, partnership, limited liability
------
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or other agency or political subdivision thereof.
"Prospectus" means the prospectus included in any Registration Statement
----------
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, and by all other
amendments and supplements to the prospectus, including post-effective
amendments, and in each case including all material incorporated by reference or
deemed to be incorporated by reference in such prospectus.
"Registrable Securities" means the Shares and any shares of Common Stock
----------------------
issued or issuable with respect to the Shares by reason of a stock dividend or
stock split, recapitalization or similar transaction, but excludes (i) Shares
the sale of which is covered by a Registration Statement that has been declared
effective under the Securities Act, (ii) Shares eligible for sale pursuant to
Rule 144 (or any similar provision then in force, but not Rule 144A) under the
Securities Act, including a sale pursuant to the provisions of Rule 144(k), and
(iii) Shares sold
<PAGE>
pursuant to Rule 144 (or any similar provision then in force, but not Rule 144A)
under the Securities Act, including a sale pursuant to the provisions of Rule
144(k).
"Registration Statement" means any registration statement of the Company
----------------------
that covers any of the Registrable Securities pursuant to the provisions of this
Agreement, and all amendments and supplements to any such registration
statement, including post-effective amendments, in each case including the
Prospectus, all exhibits, and all material incorporated by reference or deemed
to be incorporated by reference in such registration statement.
"Securities Act" means the Securities Act of 1933, as amended from time to
--------------
time, or any successor statute, and the rules and regulations of the Commission
promulgated thereunder.
SECTION 2. PIGGYBACK REGISTRATION.
----------------------
(a) If at any time or times after the date hereof while any
Registrable Securities are outstanding the Company proposes to register under
the Securities Act any shares of Common Stock (other than (i) a registration on
Form S-8 or any successor form or in connection with any employee or director
welfare, benefit or compensation plan, (ii) a registration on Form S-4 or any
successor form or in connection with an exchange offer, (iii) a registration in
connection with a securities or rights offering exclusively to the Company's
securityholders, (iv) a registration in connection with an offering solely to
employees of the Company or its affiliates, (v) a registration relating to a
transaction pursuant to Rule 145 or any other similar rule of the Commission
under the Securities Act or (vi) a shelf registration), then the Company will
give written notice of such proposed registration to the Holders at least ten
(10) business days before the filing of any Registration Statement with respect
thereto. If within five (5) business days after such notice is given, the
Company receives a written request from any Holder for the inclusion in such
Registration Statement of some or all of the Registrable Securities held by such
Holder (which request will specify the number of Registrable Securities intended
to be disposed of by such Holder and the intended method of distribution
thereof), the Company will (subject to the provisions of paragraphs (b) and (c)
of this Section 2) include such Registrable Securities in such Registration
Statement. The Company may withdraw a Registration Statement filed under this
Section 2 at any time prior to the time it becomes effective, provided that the
Company will give prompt notice of such withdrawal to the Holders which
requested to be included in such Registration Statement. Each Holder shall have
the right to request inclusion of such Holder's Registrable Securities in up to
three Registration Statements pursuant to this Section 2(a). The rights of the
Holders under this Section 2(a) will terminate on the date on which the third
Registration Statement to which such rights apply is declared effective by the
Commission.
2
<PAGE>
(b) In connection with any registration under this Section 2
involving an underwriting (an "Underwritten Offering"), the Company will not be
required to include a Holder's Registrable Securities in such Underwritten
Offering unless such Holder accepts the terms of the underwriting as agreed upon
between the Company and the underwriters selected by the Company. If the
managing underwriter(s) of an Underwritten Offering advises the Company that the
number of securities to be sold in such Underwritten Offering, including by
Persons other than the Company (including the Holders) (collectively, the
"Selling Stockholders"), is greater than the number which can be offered without
adversely affecting such Underwritten Offering, including, without limitation,
the price range or probability of success of such Underwritten Offering, then
the Company will include in such Underwritten Offering in the following
priority: (i) first, all shares the Company proposes to sell and (ii) second,
that number of shares of Common Stock proposed to be sold by the Selling
Stockholders (including Registrable Securities proposed to be sold by the
Holders) which, in the opinion of such managing underwriter(s), can be sold
without adversely affecting such Underwritten Offering, including, without
limitation, the price range or probability of success of such Underwritten
Offering, which shares shall be allocated among the Selling Stockholders
(including the Holders requesting registration) on a pro rata basis according to
the relationship that the number of shares requested to be included by each
Selling Stockholder (including the Registrable Securities requested to be
included by each Holder) in such Underwritten Offering bears to the total number
of shares requested to be registered by all Selling Stockholders (including the
total number of Registrable Securities requested to be registered by all
Holders).
(c) Each Holder hereby agrees that such Holder may not participate in
any Underwritten Offering unless such Holder (a) agrees to sell such Holder's
Registrable Securities on the basis provided in the underwriting arrangements
applicable to such Underwritten Offering and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of the underwriting
arrangements for such Underwritten Offering.
SECTION 3. REGISTRATION PROCEDURES.
-----------------------
(a) The Company will notify each Holder whose Registrable Securities
are included in a Registration Statement of the effectiveness of such
Registration Statement and will furnish to each such Holder, without charge,
such number of conformed copies of such Registration Statement and any post-
effective amendment thereto and such number of copies of the Prospectus
(including each preliminary Prospectus) and any amendments or supplements
thereto, as such Holder may reasonably request in order to facilitate the sale
of such Holder's Registrable Securities.
(b) The Company will promptly notify each Holder requesting
registration of, and confirm in writing, any request by the Commission for
amendments or supplements to the Registration Statement or the Prospectus
related thereto or for additional information. In addition, the Company will
promptly notify each such Holder of, and confirm in writing, the
3
<PAGE>
filing of the Registration Statement, any Prospectus supplement related thereto
or any post-effective amendment to the Registration Statement and the
effectiveness of any post-effective amendment.
(c) The Company will use commercially reasonable efforts to register
or qualify the Registrable Securities covered by any Registration Statement
under such other securities or "blue sky" laws of such states of the United
States as any Holder requesting registration reasonably requests; provided,
however, that the Company will not be required (i) to qualify as a foreign
corporation to do business in any jurisdiction in which it is not then
qualified, (ii) to file any general consent to service of process, or (iii) to
subject itself to taxation in any jurisdiction where it would not otherwise be
subject to taxation.
(d) At any time when a Prospectus relating to the Registration
Statement is required to be delivered under the Securities Act, the Company will
promptly notify each Holder holding Registrable Securities covered by such
Registration Statement of the happening of any event as a result of which the
Prospectus included in the Registration Statement includes an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. In such event, the
Company will promptly prepare and file with the Commission and furnish to each
such Holder a reasonable number of copies of a supplement or amendment to such
Prospectus so that, as thereafter deliverable to the purchasers of Registrable
Securities, such Prospectus will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
SECTION 4. REGISTRATION EXPENSES. The Company will bear all expenses
---------------------
incurred in connection with the registration of the Registrable Securities
pursuant to Section 2 of this Agreement; provided, however, that the Holders
-----------------
will be responsible and will pay for (i) any brokerage or underwriting discounts
and commissions and taxes of any kind (including, without limitation, transfer
taxes) with respect to any disposition, sale or transfer of Registrable
Securities, (ii) any fees or expenses of any counsel, accountants or other
persons retained or employed by the Holders and (iii) out-of-pocket expenses of
the Holders and their agents, including, without limitation, any travel costs.
SECTION 5. INDEMNIFICATION AND CONTRIBUTION.
--------------------------------
(a) Indemnification by the Company. The Company agrees to indemnify and
------------------------------
hold harmless, to the full extent permitted by law, each Holder, its officers,
directors, employees and agents and each Person, if any, which controls such
Holder within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act, (collectively, "Controlling Persons"), from and against
all losses, claims, damages, liabilities and expenses (including
4
<PAGE>
without limitation any legal or other fees and expenses reasonably incurred by
any Holder or any such Controlling Person in connection with defending or
investigating any action or claim in respect thereof) (collectively, "Damages")
to which any of them may become subject under the Securities Act or otherwise,
insofar as such Damages arise out of or are based upon (i) any untrue or alleged
untrue statement of material fact contained in any Registration Statement
(including any related preliminary or final Prospectus) pursuant to which
Registrable Securities of such Holder were registered under the Securities Act,
or (ii) any omission or alleged omission to state therein a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as and to the extent that
such statement or omission arose out of or was based upon information regarding
such Holder or its plan of distribution which was furnished to the Company by
such Holder for use therein, provided, further that the Company will not be
liable to any person who participates as an underwriter in the offering or sale
of Registrable Securities or any Controlling Person of such underwriter, in any
such case to the extent that any such Damages arise out of or are based upon (A)
an untrue statement or alleged untrue statement or omission or alleged omission
made in such Registration Statement (including any related preliminary or final
Prospectus) in reliance upon and in conformity with information furnished to the
Company for use in connection with the Registration Statement or the Prospectus
contained therein by such underwriter or Controlling Person or (B) the failure
of such underwriter or Controlling Person to send or give a copy of the final
Prospectus furnished to it by the Company at or prior to the time such action is
required by the Securities Act to the person claiming an untrue statement or
alleged untrue statement or omission or alleged omission if such statement or
omission was corrected in such final prospectus. The obligations of the Company
under this Section 5(a) shall survive the completion of any offering of
Registrable Securities pursuant to a Registration Statement under this Agreement
or otherwise and shall survive the termination of this Agreement.
(b) Indemnification by the Holders. Each Holder agrees to indemnify and
------------------------------
hold harmless, to the full extent permitted by law, the Company, its directors,
officers, employees and agents and each Controlling Person of the Company, from
and against any and all Damages to which any of them may become subject under
the Securities Act or otherwise to the extent such Damages arise out of or are
based upon any untrue statement or omission or alleged untrue statement or
omission based upon (i) any untrue statement or alleged untrue statement of
material fact contained in any Registration Statement (including any related
preliminary or final Prospectus), or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, if and to the extent that such statement or omission arose out
of or was based upon information regarding such Holder or its plan of
distribution which was furnished to the Company by such Holder for use therein,
or (ii) the failure by such Holder to deliver or cause to be delivered to any
purchaser of the shares covered by the Registration Statement the Prospectus
contained in the Registration Statement (as amended or supplemented, if
applicable) furnished by the Company to such Holder. Notwithstanding the
foregoing, (A) in no event will a Holder have any obligation under this Section
5(b) for amounts the Company pays in settlement of any such loss, claim, damage,
5
<PAGE>
liability or action if such settlement is effected without the consent of the
Holder (which consent shall not be unreasonably withheld) and (B) the total
amount for which a Holder shall be liable under this Section 5(b) shall not in
any event exceed the aggregate proceeds received by such Holder from the sale of
the Holder's Registrable Securities in such registration. The obligations of the
Holders under this Section 5(b) shall survive the completion of any offering of
Registrable Securities pursuant to a Registration Statement under this Agreement
or otherwise and shall survive the termination of this Agreement.
(c) Contribution. To the extent that the indemnification provided for in
------------
paragraph (a) or (b) of this Section 5 is held by a court of competent
jurisdiction to be unavailable to an indemnified party in respect of any
Damages, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, will contribute to the amount
paid or payable by such indemnified party as a result of such Damages (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand, and each Holder on the other, from the offering of
the Registrable Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company, on the one hand, and the Holders, on the
other, in connection with the statements or omissions which resulted in such
Damages, as well as any other relevant equitable considerations. The relative
fault of the Company on the one hand and of the Holders on the other hand will
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the Holders
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission; provided, however,
-----------------
that in no event shall the obligation of any indemnifying party to contribute
under this Section 5(c) exceed the amount that such indemnifying party would
have been obligated to pay by way of indemnification if the indemnification
provided for under paragraph (a) or (b) of this Section 5 had been available
under the circumstances.
If indemnification is available under paragraph (a) or (b) of this Section
5, the indemnifying parties will indemnify each indemnified party to the full
extent provided in such paragraphs without regard to the relative benefits to or
relative fault of said indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 5(c).
The Company and each Holder agrees that it would not be just or equitable
if contribution pursuant to this Section 5(c) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to herein.
No indemnified party guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any indemnifying party who was not guilty of such fraudulent
misrepresentation.
6
<PAGE>
SECTION 6. MARKET STAND-OFF. Each Holder whose Registrable Securities are
----------------
covered by a Registration Statement filed pursuant to Section 2 hereof agrees,
if requested by the Company in the case of a nonunderwritten offering (a
"Nonunderwritten Offering" and, together with an Underwritten Offering, an
"Offering") or if requested by the managing underwriter(s) in an Underwritten
Offering, not to effect any public sale or distribution of any of any securities
of the Company of any class included in such Offering, including a sale pursuant
to Rule 144 or Rule 144A under the Securities Act (except as part of such
Offering), during the 15-day period prior to, and during the 180-day period (or
such longer period as may be required by the managing underwriter(s)) beginning
on, the date of pricing of each Offering, to the extent timely notified in
writing by the Company or the managing underwriter(s).
SECTION 7. COVENANTS OF HOLDERS. Each Holder will (a) furnish to the
--------------------
Company such information regarding such Holder and such Holder's intended method
of distribution of the Registrable Securities as the Company may from time to
time reasonably request in writing in order to comply with the Securities Act
and the provisions of this Agreement, (b) to the extent required by the
Securities Act, deliver or cause delivery of the Prospectus contained in the
Registration Statement to any purchaser of such Holder's Registrable Securities
covered by the Registration Statement, (c) promptly notify the Company of any
sale of Registrable Securities by such Holder and (d) notify the Company as
promptly as practicable of any inaccuracy or change in information previously
furnished by the Holder to the Company or of the occurrence of any event, in
either case as a result of which any Prospectus contains or would contain an
untrue statement of a material fact regarding the Holder or the Holder's
intended method of distribution of the Registrable Securities or omits or would
omit to state any material fact regarding the Holder or the Holder's intended
method of distribution of the Registrable Securities required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing, and promptly furnish to the Company any
additional information required to correct and update any previously furnished
information or required so that the Prospectus will not contain, with respect to
the Holder or the Holder's intended method of distribution of the Registrable
Securities, an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing.
SECTION 8. MISCELLANEOUS.
-------------
(a) Amendments and Waivers. The provisions of this Agreement, including
----------------------
this Section 8(a), may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof will not be effective, unless
the Company has obtained the written consent of the Holders of a majority in
interest of the Registrable Securities then outstanding; provided, however, that
-----------------
any such amendment, modification, supplement or waiver which materially
adversely affects the rights of any Holder shall require the prior written
consent of such Holder.
7
<PAGE>
(b) Notices. Except as set forth below, all notices and other
-------
communications provided for or permitted hereunder shall be in writing and shall
be deemed to have been duly given if delivered personally or sent by facsimile,
registered or certified mail (return receipt requested), postage prepaid or
courier or overnight delivery service to the Company at the following address
and to each Holder at the address set forth below such Holder's signature to
this Agreement (or at such other address for any party as shall be specified by
like notice, provided that notices of a change of address shall be effective
only upon receipt thereof), and further provided that in case of directions to
amend the Registration Statement pursuant to Section 7, a Holder must confirm
such notice in writing by overnight express delivery with confirmation of
receipt:
If to the Company: Plug Power Inc.
968 Albany-Shaker Road
Latham, New York 12110
Attention: General Counsel
Facsimile No.: 518-782-7914
In addition to the manner of notice permitted above, notices given pursuant to
Sections 1 and 6 hereof may be effected telephonically and confirmed in writing
thereafter in the manner described above.
(c) Successors and Assigns. This Agreement will inure to the benefit of
----------------------
and be binding upon the successors of each of the parties. No Holder may assign
any of its rights hereunder without the prior written consent of the Company and
any attempted assignment by any Holder without such consent will be void and of
no effect and will terminate all obligations of the Company hereunder with
respect to such Holder.
(d) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed will be deemed to be an original and all of which taken
together will constitute one and the same agreement.
(e) Headings. The headings in this Agreement are for convenience of
--------
reference only and will not limit or otherwise affect the meaning hereof.
(f) Governing Law. This Agreement will be governed by and construed in
-------------
accordance with the laws of the State of Delaware without regard to principles
of conflicts of law.
(g) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein will not be in any way
8
<PAGE>
impaired thereby, it being intended that all of the rights and privileges of the
Holders will be enforceable to the fullest extent permitted by law.
(h) Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and is intended to be the complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter, including such
agreements and understandings contained in the Limited Liability Company
Agreement forming Plug Power, LLC.
[Remainder of Page Intentionally Left Blank]
9
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first set forth above.
PLUG POWER INC.
------------------------------------
Gary Mittleman
Chief Executive Officer
10
<PAGE>
REGISTRATION RIGHTS AGREEMENT
HOLDER SIGNATURE PAGE
EDISON DEVELOPMENT CORPORATION
------------------------------------
Name:
Title:
Address for Notice:
------------------------------------
------------------------------------
------------------------------------
MECHANICAL TECHNOLOGY INCORPORATED
------------------------------------
Name:
Title:
Address for Notice:
------------------------------------
------------------------------------
------------------------------------
GE ON-SITE POWER, INC.
------------------------------------
Name:
Title:
Address for Notice:
------------------------------------
------------------------------------
------------------------------------
11
<PAGE>
------------------------------------
Michael J. Cudahy
Address for Notice:
------------------------------------
------------------------------------
------------------------------------
ANTEAUS ENTERPRISES, INC.
------------------------------------
Name:
Title:
Address for Notice:
------------------------------------
------------------------------------
------------------------------------
ANTEAUS RETIREMENT BENEFITS PLAN [2]
------------------------------------
Name:
Title:
Address for Notice:
------------------------------------
------------------------------------
------------------------------------
12
<PAGE>
------------------------------------
Kevin Linsey
Address for Notice:
------------------------------------
------------------------------------
------------------------------------
13
<PAGE>
EXHIBIT A
---------
<TABLE>
<CAPTION>
HOLDER NUMBER OF SHARES
- ------ ----------------
<S> <C>
Edison Development Corporation 13,704,315
Mechanical Technology Incorporated 13,704,315
GE On-Site Power, Inc. 5,250,000
Michael J. Cudahy 1,840,000
Southern California Gas Company 1,350,000
Antaeus Enterprises [1]
Antaeus Enterprises [2] [299,850]
Kevin Linsey 60,000
</TABLE>
DOCSC\803966.1
14
<PAGE>
Exhibit 10.37
FORM OF REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and entered
into as of August __, 1999, by and among PLUG POWER, L.L.C., a Delaware limited
liability company ("PP, LLC"), and GE ON-SITE POWER, INC., a Delaware
corporation ("GEOSP").
WHEREAS:
A. PP, LLC originally was formed in June 1997 as a Delaware limited
liability company. Upon effectiveness of PP, LLC's proposed initial public
offering (the "IPO"), PP, LLC will merge (the "Merger") into a newly formed
Delaware corporation ("PP, Inc.") and all of PP, LLC's outstanding Class A
membership interests (the " Class A Interests") will be converted on a one-for-
one basis into shares of common stock of PP, Inc. (the "Common Stock").
B. GEOSP currently owns an aggregate of 2,250,000 shares of Class A
Interests and an option (the "Option") to purchase an additional 3,000,000
shares of Class A Interests at a price of $12.50 per share. Pursuant to the
terms of the Agreement dated of even date herewith (the "Exercise Agreement") by
and among PP, LLC, GEOSP, GE Power Systems business of General Electric Company,
a New York corporation, and GE Fuel Cell Systems, L.L.C., a Delaware limited
liability company, GEOSP has agreed to exercise the Option concurrently with or
prior to the IPO. As a result, upon effectiveness of the Merger, the Class A
Interests then owned by GEOSP (including the 3,000,000 shares issuable upon
exercise of the Option) will be converted into an aggregate of 5,250,000 shares
of common stock. As used herein, the term "Shares" shall mean, for periods prior
to the Merger, the 5,250,000 shares of Class A Interests owned by GEOSP
(including the shares of Class A Interests issued or issuable upon exercise of
the Option) and, for periods after the Merger, shall mean the 5,250,000 shares
of Common Stock issued to GEOSP in exchange for its Class A Interests in
connection with the Merger (including such shares issued in connection with the
exercise of the Option). Further, the term "PP" shall mean, for periods prior to
the Merger, PP, LLC, and, for periods after the Merger, PP, Inc.
C. To induce GEOSP to execute and deliver the Exercise Agreement, PP has
agreed to provide certain registration rights under the Securities Act of 1933,
as amended, and the rules and regulations thereunder, or any similar successor
statute (collectively, the "1933 ACT"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, PP and GEOSP hereby agree as
follows:
1. DEFINITIONS.
-----------
a. As used in this Agreement, the following terms shall have the
following meanings:
i. "INVESTOR" means GEOSP and any transferee or assignee thereof who
agrees to become bound by the provisions of this Agreement in accordance with
Section 9 hereof.
ii. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement or
Registration Statements in compliance with the 1933 Act and pursuant to Rule 415
under the 1933 Act or any successor rule providing for offering
<PAGE>
securities on a continuous basis ("RULE 415"), and the declaration or ordering
of effectiveness of such Registration Statement by the United States Securities
and Exchange Commission (the "SEC").
iii. "REGISTRATION PERIOD" means, with regard to any Investor and the
shares of Registrable Securities then held by such Investor, that period
beginning on the first anniversary of the closing date of the IPO and ending on
the date on which such shares of Regisitrable Securities may be publicly sold
(without restriction as to the number of shares that may be sold) pursuant to
Rule 144 of the SEC under the 1933 Act. It is understood and agreed that the
termination of the Registration Period applicable to one or more Investors shall
not result in the termination of the Registration Period applicable to other
Investors.
iv. "REGISTRABLE SECURITIES" means (A) the Shares and (B) any other
shares of Class A Interests or Common Stock, as the case may be, now held or
hereafter acquired by GEOSP or any other entity that controls, is controlled by
or is under common control with GEOSP, and (C) any Class A Interests or Common
Stock issued or issuable with respect to Registrable Securities by reason of a
stock dividend or stock split or connection with a confirmation of shares,
recapitalization, merger, consolidation or other reorganization.
v. "REGISTRATION STATEMENT" means a registration statement of PP under
the 1933 Act.
b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Exercise Agreement.
2. REGISTRATION.
------------
a. Demand Registration.
-------------------
(i) If, at any time during the Registration Period, either (A)
Investors holding at least 25% of the Registrable Securities then outstanding or
(B) GEOSP, propose to dispose of, pursuant to a Long Form Registration Statement
(as defined below) (whether or not PP is eligible to use a Short Form
Registration Statement (as defined below)), all or part of their shares of the
Registrable Securities, then such Investors or GESOP may request PP in writing
to effect such registration under the 1933 Act, stating the form of registration
statement under the 1933 Act to be used, the number of shares of Registrable
Securities to be disposed of and the intended method(s) of disposition of such
shares. The term "LONG FORM REGISTRATION STATEMENT" shall mean a registration
statement on Form S-1, Form S-2, Form SB-1 or Form SB-2, or any similar or
successor form of registration statement adopted by the SEC from and after the
date hereof. The term "SHORT FORM REGISTRATION STATEMENT" shall mean a
registration statement on Form S-3 or any similar or successor form of
registration statement adopted by the SEC from and after the date hereof.
(ii) Notwithstanding the foregoing, if at any time at which PP is
entitled to file a registration statement on a Short Form Registration
Statement, either (A) Investors who propose to dispose of, pursuant to a Short
Form Registration Statement, shares of Registrable Securities which such
Investors in their good faith discretion determine would have an anticipated
aggregate offering price of at least $100,000 or (B) GEOSP, proposes to dispose
of all or part of its Registrable Securities pursuant to a Short Form
Registration Statement, then such Investors or GESOP may request PP in writing
to effect such registration on a Short Form Registration Statement, stating the
number of shares of Registrable Securities to be disposed of and the intended
method(s) of disposition of such shares. Holders of Registrable Securities
which request registration pursuant to Section 2.(a)(i) or (ii) are referred to
herein as the "INITIATING HOLDERS".
2
<PAGE>
(iii) Upon receipt of a request pursuant to Section 2(a)(i) or
(ii) above, PP shall give prompt written notice thereof to all other Investors
who hold Registrable Securities. Upon receipt of such request, PP shall
promptly effect the registration under the 1933 Act of all shares of Registrable
Securities specified in the requests of the Initiating Holders and the requests
(stating the number of shares of Registrable Securities to be disposed of and
the intended method of disposition of such shares) of other holders of shares of
Registrable Securities given within 20 days after receipt of such notice from PP
all to the extent requisite to permit the disposition (in accordance with the
intended methods of disposition) of the Registrable Securities to be registered.
(iv) Notwithstanding the foregoing, PP may postpone taking action with
respect to a Demand Registration for a reasonable period of time after receipt
of the request (not exceeding 60 days) if, in the good faith opinion of PP's
Board of Directors, effecting the registration would adversely affect a material
financing, acquisition, disposition of assets or stock, merger or other
comparable transaction or would require PP to make public disclosure of
information the public disclosure of which would have a material adverse effect
upon PP; provided that PP shall not delay such action pursuant to this sentence
--------
more than once in any twelve (12) month period. The Registration Statement (and
each amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided to and approved by GEOSP and its
counsel prior to its filing or other submission, such approval not to be
unreasonably withheld.
b. Underwritten Offering. If any offering pursuant to a
---------------------
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, GEOSP shall have the right to select one legal counsel and an
investment banker or bankers and manager or managers to administer its interest
in the offering, which investment banker or bankers or manager or managers shall
be reasonably satisfactory to PP.
c. Piggy-Back Registrations. If at any time after the IPO and prior
-------------------------
to the expiration of the Registration Period PP shall file with the SEC a
Registration Statement relating to an offering for its own account or the
account of others under the 1933 Act of any of its equity securities (other than
on Form S-4 or Form S-8 or their then equivalents relating to equity securities
to be issued solely in connection with any acquisition of any entity or business
or equity securities issuable in connection with stock option or other employee
benefit plans) PP shall send to GEOSP written notice of such determination and,
if within twenty (20) days after receipt of such notice, GEOSP shall so request
in writing, PP shall include in such Registration Statement all or any part of
the Registrable Securities GEOSP requests to be registered, except that if, in
connection with any underwritten public offering for the account of PP, the
managing underwriter(s) thereof shall impose a limitation on the number of
shares of Registrable Securities which may be included in the Registration
Statement because, in such underwriter(s)' judgment, marketing or other factors
dictate such limitation is necessary to facilitate public distribution (and
provided that such determination does not take into account GEOSP's or its
affiliates' technical support and/or distribution relationships with PP), then
PP shall be obligated to include in such Registration Statement only such
limited portion of the Registrable Securities with respect to which GEOSP has
requested inclusion hereunder; provided, that no portion of the equity
---------
securities which PP is offering for its own account shall be excluded; provided,
--------
further that PP shall be entitled to exclude Registrable Securities to the
- -------
extent necessary to avoid breaching obligations existing prior to the date
hereof to other stockholders of PP. Any exclusion of Registrable Securities
shall be made pro rata among the Investors seeking to include Registrable
Securities, in proportion to the number of Registrable Securities sought to be
included by such Investors; provided, however, that PP shall not exclude any
-------- -------
Registrable Securities unless PP has first excluded all outstanding securities,
the holders of which are not entitled to inclusion of such securities in such
Registration Statement or are not entitled to pro rata inclusion with the
Registrable Securities; and provided, further, however, that, after giving
-------- ------- -------
effect to the
3
<PAGE>
immediately preceding proviso, any exclusion of Registrable Securities shall be
made pro rata with holders of other securities having the right hereunder to
include such securities in the Registration Statement. No right to registration
of Registrable Securities under this Section 2(c) shall be construed to limit
any registration required under Section 2(a) hereof. The obligations of PP under
this Section 2(c) may be waived by GEOSP. If an offering in connection with
which GEOSP is entitled to registration under this Section 2(c) is an
underwritten offering, then GEOSP shall, unless otherwise agreed by PP, offer
and sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement, on
the same terms and conditions as other shares of Class A Interests or Common
Stock included in such underwritten offering.
d. Eligibility for Form S-3. PP shall file all reports required to
------------------------
be filed by PP with the SEC in a timely manner so as to establish eligibility
for the use of Form S-3. In the event that Form S-3 is not available for sale
by GEOSP of the Registrable Securities, PP shall register the sale on another
appropriate form acceptable to GEOSP.
e. Cutback Registration. "Cutback Registration" means any Demand
--------------------
Registration or Piggyback Registration to be effected as an underwritten
offering in which the managing underwriter with respect thereto advises PP in
writing that, in its opinion, the number of securities requested to be included
in such registration (including securities of PP which are not Registrable
Securities) exceed the number which can be sold in such offering without a
material reduction in the selling price anticipated to be received for the
securities to be sold in such offering.
(i) If a Demand Registration becomes a Cutback Registration, PP
will include in any such registration to the extent of the number which the
managing underwriter of an offering advises PP can be sold in such offering (i)
first, Registrable Securities requested to be included in such registration by
- ------
GEOSP and (ii) second, other securities of PP proposed to be included in such
------
registration, allocated among the holders thereof in accordance with the
priorities then existing among PP and the holders of such other securities; and
any securities so excluded shall be withdrawn from and shall not be included in
such Demand Registration.
(ii) If a Piggyback Registration becomes a Cutback Registration, PP
will include in such registration to the extent of the amount of the securities
which the managing underwriter advises PP can be sold in such offering:
(A) if such registration as initially proposed by PP was solely a
primary registration of its securities, (x) first, the securities proposed
------
by PP to be sold for its own account, (y) second, any Registrable
------
Securities requested to be included in such registration by GEOSP, and (z)
third, any other securities of PP proposed to be included in such
registration, allocated among the holders thereof in accordance with the
priorities then existing among PP and such holders; and
(B) if such registration as initially proposed by PP was in whole
or in part requested by holders of securities of PP, other than holders of
Registrable Securities in their capacities as such, pursuant to demand
registration rights, (x) first, such securities held by the holders
-----
initiating such registration and, if applicable, any securities proposed by
PP to be sold for its own account, allocated in accordance with the
priorities then existing among PP any such holders, (y) second, any
------
Registrable Securities requested to be included in such registration by
GEOSP, and (z) third, any other securities of PP proposed to be included in
-----
such registration, allocated among the holders thereof in accordance with
the priorities then existing among PP and the holders of such other
securities;
4
<PAGE>
and any securities so excluded shall be withdrawn from and shall not be included
in such Piggyback Registration.
3. OBLIGATIONS OF THE COMPANY.
--------------------------
In connection with the registration of the Registrable Securities, PP shall
have the following obligations:
a. PP shall prepare promptly, and file with the SEC as required by
Section 2(a), a Registration Statement with respect to the number of Registrable
Securities specified as provided in Section 2(a), and thereafter shall use its
best efforts to cause such Registration Statement relating to Registrable
Securities to become effective as soon as possible after such filing, and keep
the Registration Statement effective pursuant to Rule 415 at all times until the
earlier of (i) the date as of which all Investors with Registrable Securities
included in the Registration Statement may sell all of their Registrable
Securities without restriction pursuant to Rule 144(k) promulgated under the
1933 Act, or (ii) the date on which all Investors with Registrable Securities
included in the Registration Statement have sold such Registrable Securities,
which Registration Statement (including any amendments or supplements thereto
and prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading. Each Investor shall give notice to PP when it
has sold all of its Registrable Securities.
b. PP shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during such period, comply with the provisions of the
1933 Act with respect to the disposition of all Registrable Securities of PP
covered by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement.
c. PP shall furnish to GEOSP and its legal counsel (i) promptly
after the same is prepared and publicly distributed, filed with the SEC, or
received by PP, one copy of the Registration Statement and any amendment
thereto, each preliminary prospectus and prospectus and each amendment or
supplement thereto, and (ii) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents as GEOSP may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by GEOSP.
d. In the case of the Registration Statement referred to in Section
2(a), PP shall furnish to the counsel of GEOSP each letter written by or on
behalf of PP to the SEC or the staff of the SEC, and each item of correspondence
from the SEC or the staff of the SEC, in each case relating to such Registration
Statement (other than any portion of any thereof which contains information for
which PP has sought confidential treatment).
e. PP shall use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such other
securities or "blue sky" laws of such jurisdictions in the United States as
GEOSP reasonably requests, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or
5
<PAGE>
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that PP shall not be required in connection therewith or as a
- -------- -------
condition thereto to (a) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 3(e), (b)
subject itself to general taxation in any such jurisdiction, or (c) file a
general consent to service of process in any such jurisdiction.
f. In the event GEOSP selects underwriters for the offering, PP
shall enter into and perform its obligations under an underwriting agreement, in
usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering. PP shall not be required to provide such Underwriter with rights of
first refusal with respect to any subsequent offerings, including debt and
equity financing, or any requirements with respect to mergers, acquisitions or
other business combinations.
g. As promptly as practicable after becoming aware of such event, PP
shall notify GEOSP of the happening of any event, of which PP has knowledge, as
a result of which the prospectus included in the Registration Statement, as then
in effect, includes an untrue statement of a material fact or omission to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement to correct such untrue statement or
omission, and deliver such number of copies of such supplement or amendment to
GEOSP as it may reasonably request.
h. PP shall use its best efforts to prevent the issuance of any stop
order or other suspension of effectiveness of a Registration Statement, and, if
such an order is issued, to obtain the withdrawal of such order at the earliest
possible moment and to notify GEOSP (or, in the event of an underwritten
offering, the managing underwriters) of the issuance of such order and the
resolution thereof.
i. PP shall permit a single firm of counsel, designated as selling
stockholders' counsel by GEOSP, to review the Registration Statement and all
amendments and supplements thereto a reasonable period of time prior to their
filing with the SEC, and not file any document in a form to which such counsel
reasonably objects.
j. PP shall make generally available to its security holders as soon
as practicable, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the 1933 Act) covering a twelve-month period
beginning not later than the first day of PP's fiscal quarter next following the
effective date of the Registration Statement.
k. At the request of GEOSP, PP shall furnish, on the date that
Registrable Securities are delivered to an underwriter, if any, for sale in
connection with the Registration Statement (i) if required by an underwriter, a
"comfort" letter, dated such date, from PP's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, and (ii) an opinion, dated as of such date, from
counsel representing PP for purposes of such Registration Statement and the
underwriting agreement, in form, scope and substance as is customarily given in
an underwritten public offering, addressed to the underwriters and GEOSP.
l. PP shall make available for inspection by (i) GEOSP, (ii) any
underwriter participating in any disposition pursuant to the Registration
Statement, (iii) one firm of attorneys and one firm of accountants or other
agents retained by GEOSP, and (iv) one firm of attorneys retained by all such
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<PAGE>
underwriters (collectively, the "INSPECTORS") all pertinent financial and other
records, and pertinent corporate documents and properties of PP (collectively,
the "RECORDS"), as shall be reasonably deemed necessary by each Inspector to
enable each Inspector to exercise its due diligence responsibility, and cause
PP's officers, directors and employees to supply all information which any
Inspector may reasonably request for purposes of such due diligence; provided,
--------
however, that each Inspector shall hold in confidence and shall not make any
- -------
disclosure (except to GEOSP and to other Inspectors) of any Record or other
information which PP determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement, (b) the release of such Records is ordered pursuant to a
subpoena or other order from a court or government body of competent
jurisdiction, or (c) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. PP shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such Inspector
shall have entered into confidentiality agreements (in form and substance
satisfactory to PP) with PP with respect thereto, substantially in the form of
this Section 3(l). GEOSP agrees that it shall, upon learning that disclosure of
such Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to PP and allow PP, at
its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, the Records deemed confidential.
m. PP shall hold in confidence and not make any disclosure of
information concerning GEOSP provided to PP unless (i) disclosure of such
information is necessary to comply with federal or state securities laws, (ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction, or (iv) such information has
been made generally available to the public other than by disclosure in
violation of this or any other agreement. PP agrees that it shall, upon
learning that disclosure of such information concerning GEOSP is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to GEOSP and allow GEOSP, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
n. PP shall use its best efforts either to (i) cause all the
Registrable Securities covered by the Registration Statement to be listed on the
New York Stock Exchange or the American Stock Exchange and on each additional
national securities exchange on which securities of the same class or series
issued by PP are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii) secure
designation and quotation of all the Registrable Securities covered by the
Registration Statement on the Nasdaq National Market or Nasdaq SmallCap Market.
o. PP shall provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities, and shall provide CUSIP numbers
for the Registrable Securities, not later than the effective date of the
Registration Statement.
p. PP shall cooperate with GEOSP and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing the Registrable Securities to be offered pursuant to
the Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the managing underwriter or
underwriters, if any, or GEOSP may reasonably request and registered in such
names as the managing underwriter or underwriters, if any, or GEOSP may request.
No later than the effective date of any Registration Statement registering the
resale of Registrable Securities, PP shall deliver to its transfer agent
instructions, accompanied by any reasonably required opinion of counsel, that
permit sales of legended securities in a timely fashion that complies with then
mandated securities settlement procedures for regular way market transactions.
7
<PAGE>
q. PP shall take all other reasonable actions necessary to expedite
and facilitate disposition by GEOSP of Registrable Securities pursuant to the
Registration Statement.
4. OBLIGATIONS OF GEOSP.
--------------------
In connection with the registration of the Registrable Securities, GEOSP
shall have the following obligations:
a. It shall be a condition precedent to the obligations of PP to
complete the registration pursuant to this Agreement and to make payments under
Section 2(c) hereof with respect to the Registrable Securities of GEOSP that
GEOSP shall furnish to PP such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as PP may reasonably request. At least five (5) days
prior to the first anticipated filing date of the Registration Statement, PP
shall notify GEOSP in writing of the information PP requires from GEOSP if it
elects to have any of its Registrable Securities included in the Registration
Statement.
b. GEOSP by its acceptance of the Registrable Securities agrees to
cooperate with PP as reasonably requested by PP in connection with the
preparation and filing of the Registration Statement hereunder, unless GEOSP has
notified PP in writing of its election to exclude all of its Registrable
Securities from the Registration Statement.
c. In the event GEOSP determines to engage the services of an
underwriter, GEOSP agrees to enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless GEOSP has notified PP in writing of GEOSP's
election to exclude all of its Registrable Securities from the Registration
Statement.
d. GEOSP agrees that, upon receipt of any notice from PP of the
happening of any event of the kind described in Section 3(g) or 3(h), GEOSP will
immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until GEOSP's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 3(g) or 3(h) and, if so directed by PP, GEOSP shall deliver to PP (at
the expense of PP) or destroy (and deliver to PP a certificate of destruction)
all copies in GEOSP's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
e. An Investor may not participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell its Registrable Securities on
the basis provided in any underwriting arrangements approved by such Investor,
(ii) completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements, and (iii) agrees to pay its pro rata share of
all underwriting discounts and commissions.
8
<PAGE>
5. EXPENSES OF REGISTRATION.
------------------------
All reasonable expenses (other than underwriting discounts, selling
concessions and commissions) incurred in connection with registrations, filings
or qualifications pursuant to Sections 2 and 3, including, without limitation,
all registration, listing and qualifications fees, printers and accounting fees,
the fees and disbursements of counsel for PP, the fees and disbursements of
counsel for GEOSP, and the costs incident to an underwritten offering shall be
borne by PP, subject to Section 3(f) hereof and provided that PP shall not be
required to pay the expenses for more than two Demand Registrations using Long
Form Registration Statements and requested pursuant to Section 2.a(i) hereof;
all such registration expenses incurred in connection with any Demand
Registration after the first two shall be allocated among all persons or
entities (including PP) on whose behalf securities of PP are included in such
registration, pro rata on the basis of the respective amounts of the securities
--- ----
then being registered on their behalf, except that PP shall be required to pay
such registration expenses to the extent that either the first or second Demand
Registration constituted a Cutback Registration and PP would have otherwise been
required to pay such registration expenses.
6. INDEMNIFICATION.
---------------
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, PP will indemnify, hold harmless
and defend (i) each Investor who has Registrable Securities included in the
Registration Statement, (ii) the directors, officers and each person who
controls such Investor within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 ACT"), if any, and (iii) any
underwriter (as defined in the 1933 Act) for such Investor; and the directors,
officers and each person who controls any such underwriter within the meaning of
the 1933 Act or the 1934 Act, if any, (each, an "INDEMNIFIED PERSON"), against
any losses, claims, damages, liabilities or expenses (joint or several)
(collectively, "CLAIMS") to which any of them may become subject insofar as such
Claims (or actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or the omission
or alleged omission to state a material fact therein required to be stated or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
PP files any amendment thereof or supplement thereto with the SEC) or the
omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by PP of the 1933 Act, the 1934 Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement (the matters in the foregoing clauses (i) through (iii)
being, collectively, "VIOLATIONS"). Subject to the restrictions set forth in
Section 6(d) with respect to the number of legal counsel, PP shall reimburse
GEOSP and each such underwriter or controlling person, promptly as such expenses
are incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i) shall not apply to
a Claim arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to PP by any Indemnified
Person or underwriter for such Indemnified Person expressly for use in
connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available to GEOSP by PP pursuant to Section
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3(c) hereof; (ii) with respect to any preliminary prospectus, shall not inure to
the benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by PP pursuant to Section 3(c) hereof; (iii) shall not be
available to the extent such Claim is based on a failure of GEOSP to deliver or
to cause to be delivered the prospectus made available by PP; and (iv) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of PP, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by GEOSP pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, such Investor, severally and not jointly, agrees to
indemnify, hold harmless and defend, to the same extent and in the same manner
set forth in Section 6(a), PP, each of its directors, each of its officers who
signs the Registration Statement, each person, if any, who controls PP within
the meaning of the 1933 Act or the 1934 Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an indemnified Person, an "INDEMNIFIED PARTY"), against any Claim
to which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such violation occurs
in reliance upon and in conformity with written information furnished to PP by
such Investor expressly for use in connection with such Registration Statement;
and such Investor will reimburse any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such Claim; provided,
--------
however, that the indemnity agreement contained in this Section 6(b) shall not
- -------
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that such Investor shall be
--------------------------
liable under this Section 6(b) for only that amount of a Claim as does not
exceed the net proceeds to such Investor as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
such Indemnified Party and shall survive the transfer of the Registrable
Securities by such Investor pursuant to Section 9. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
c. PP shall be entitled to receive indemnities from underwriters,
selling brokers, dealer managers and similar securities industry professionals
participating in any distribution, to the same extent as provided above, with
respect to information such persons so furnished in writing by such persons
expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
--------
however, that an
- -------
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Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. PP shall pay
reasonable fees for only one separate legal counsel for GEOSP, and such legal
counsel shall be selected by GEOSP; provided, that legal fees of such firm shall
be reasonable. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this Section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.
7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that (i) no
-------- -------
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to holders of Registrable Securities the
benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit GEOSP to sell securities of PP
to the public without registration ("RULE 144"), PP agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of PP under the 1933 Act and the 1934 Act so long as PP
remains subject to such requirements (it being understood that nothing herein
shall limit PP's obligations under the Exercise Agreement) and the filing of
such reports and other documents is required for the applicable provisions of
Rule 144; and
c. furnish to GEOSP so long as it owns Registrable Securities,
promptly upon request, (i) a written statement by PP that it has complied with
the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a
copy of the most recent annual or quarterly report of PP and such other reports
and documents so filed by PP, and (iii) such other information as may be
reasonably requested to permit GEOSP to sell such securities pursuant to Rule
144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights to have PP register Registrable Securities pursuant to this
Agreement shall be automatically assignable by GEOSP to any transferee of all or
any portion of Registrable Securities if: (i) GEOSP agrees in writing with the
transferee or assignee to assign such rights, and a copy of such
11
<PAGE>
agreement is furnished to PP within a reasonable time after such assignment,
(ii) PP is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned, (iii) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws,
(iv) at or before the time PP receives the written notice contemplated by clause
(ii) of this sentence the transferee or assignee agrees in writing with PP to be
bound by all of the provisions contained herein, (v) such transfer shall have
been made in accordance with the applicable requirements of the Exercise
Agreement, and (vi) in the event the assignment occurs subsequent to the date of
effectiveness of the Registration Statement required to be filed pursuant to
Section 2(a), the transferee agrees to pay all its reasonable expenses of
amending or supplementing such Registration Statement to reflect such
assignment.
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of PP and GEOSP. Any amendment
or waiver effected in accordance with this Section 10 shall be binding upon
GEOSP and PP.
11. MISCELLANEOUS.
-------------
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If PP receives conflicting instructions, notices or elections from
two or more persons or entities with respect to the same Registrable Securities,
PP shall act upon the basis of instructions, notice or election received from
the registered owner of such Registrable Securities.
b. Notices. Any notices required or permitted to be given under the
-------
terms of this Agreement shall be in writing and shall be deemed given (a) when
delivered personally, (b) five days after deposit, postage prepaid, if mailed by
registered or certified mail, return receipt requested, or (c) upon transmission
if transmitted by telex or facsimile (with an electronic confirmation thereof to
the transmitter). The addresses for such communications shall be:
If to PP: Plug Power, L.L.C.
968 Albany-Shaker Road
Latham, New York 12110
Attn: Mr. Gary Mittleman
Telecopy: (518) 782-7884
With a copy to:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn: __________________________________
Telecopy:_______________________________
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If to GEOSP: GE On-Site Power, Inc.
968 Albany-Shaker Road, Building 1
Latham, New York 12110
Attn: Mr. Barry Glickman
Telecopy: (518) 785-2831
With a copy to:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
-----------------------------------
Telecopy:
-------------------------------
Each party shall provide notice to the other party of any change in address.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of New York without giving effect to any
choice or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York. In the event that any provision
of this Agreement is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision hereof.
e. This Agreement and the Exercise Agreement constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein.
This Agreement and the Exercise Agreement supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a
party, may be delivered to the other party hereto by facsimile transmission of a
copy of this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
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IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
PLUG POWER, L.L.C.
------------------
By:________________________
Name:______________________
Its:_______________________
GE ON-SITE POWER, INC.
By:________________________
Name:______________________
Its:_______________________
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EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 (File
No. 333-86089) of our report dated April 9, 1999 relating to the financial
statements of Plug Power LLC (a development stage enterprise), which appear in
such Registration Statement. We also consent to the references to us under the
headings "Experts" and "Selected Historical Financial Data" in such
Registration Statement.
PricewaterhouseCoopers LLP
Albany, New York
October 26, 1999
<PAGE>
EXHIBIT 99.2
Pursuant to Rule 438 of the Securities Act of 1933, I, General John M.
Shalikashvili hereby consent to being named as a nominee for Director in the
Registration Statement on Form S-1 being filed by Plug Power Inc. on or about
October 21, 1999, and any amendments thereto.
By: /s/ John M. Shalikashvili
---------------------------------
General John M. Shalikashvili
Date: October 25, 1999
